Oakmont LLC v. Clackamas County Assessor , 21 Or. Tax 375 ( 2014 )

No. 49 April 29, 2014 375
IN THE OREGON TAX COURT
REGULAR DIVISION
OAKMONT LLC,
Plaintiff,
v.
CLACKAMAS COUNTY ASSESSOR
and Department of Revenue,
Defendants.
(TC 5178)
Plaintiff (taxpayer) appealed from a Magistrate Division decision where
Defendant (the department) had decided that it would not exercise supervisory
jurisdiction pursuant to ORS 306.115 in respect of certain property of taxpayer
(the subject property). Both the department and Defendant Clackamas County
Assessor (the county) opposed the assertion of taxpayer that in deciding not to
exercise supervisory jurisdiction, the department abused its discretion. Granting
taxpayer’s motion for summary judgment, the court ruled that as agreement of
parties need only indicate a likelihood of an error having occurred, and it need
not conclusively establish the existence of an error, the approach and conclusion
of the department’s hearing officer was clearly wrong, and the product of an
abuse of discretion.
Oral argument on cross-motions for summary judgment
was held January 21, 2014, in the courtroom of the Oregon
Tax Court, Salem.
Jack L. Orchard, Ball Janik LLP, Portland, filed the
motion and argued the cause for Plaintiff (taxpayer).
Douglas M. Adair, Senior Assistant Attorney General,
Department of Justice, Salem, filed the cross-motion and
argued the cause for Defendant Department of Revenue (the
department).
Kathleen J. Rastetter, Assistant County Counsel, Oregon
City, filed the cross-motion for Defendant Clackamas County
Assessor (the county).
Decision for Plaintiff rendered April 29, 2014.
HENRY C. BREITHAUPT, Judge.
376 Oakmont LLC v. Clackamas County Assessor
I. INTRODUCTION
This matter is before the court on cross-motions
for summary judgment. Plaintiff (taxpayer) appealed from
a decision of Defendant (the department) that it would not
exercise supervisory jurisdiction pursuant to ORS 306.115
in respect of certain property of taxpayer (the subject prop-
erty). Both the department and Defendant Clackamas
County Assessor (the county) oppose the assertion of tax-
payer that in deciding not to exercise supervisory jurisdic-
tion, the department abused its discretion.
II. FACTS
The subject property is a large apartment complex.
The property was built in 1996. The year in question is the
2008-09 tax year. From the actions of the county in assess-
ing the subject property as of January 1, 2008, taxpayer
took no appeal under the statutory appeal procedures.
Taxpayer filed its petition with the department
seeking relief under ORS 306.115 on June 9, 2011. Certain
material was submitted to the hearing officer for the depart-
ment and a supervisory hearing was held on December 15,
2011. By the time of the petition for the 2008-09 year and
well before the supervisory hearing, taxpayer had timely
appealed the valuation of the subject property for the imme-
diately succeeding 2009-10 tax year.
The initial real market value (RMV) for the sub-
ject property determined by the county for the 2009-10 tax
year was $21,756,425.1 Before the Board of Property Tax
Appeals (BOPTA), the county had recommended that the
RMV be reduced to $15,882,496. An analysis by a county
appraiser reached this conclusion based on an income indi-
cator of value but also noted that there was pending litiga-
tion regarding design and construction defects at the prop-
erty. The county appraiser also stated that he would “rely
on the lower contractor’s bid of $5 million to correct the
defects in the construction as the measure of cost to cure
for purposes of estimating market value for the BOPTA
appeal.”
1
These record citations are to the record designations to which all parties
agreed as the citations to the record before the department.
Cite as 21 OTR 375 (2014) 377
Taxpayer asserted in the BOPTA proceeding and
thereafter that the RMV was substantially lower than that
recommended to the BOPTA by the county. In connection
with litigation in this court, the county appraiser concluded
that a determination of RMV would have to take into account
rehabilitation costs, rent loss, and risk and further reduced
his opinion of “as-is” value to $ 13,065,000. The dispute as to
the value of the property as of January 1, 2009, was ended
with a stipulated judgment that the RMV of the property
on that date was at the even significantly lower figure of
$8,500,000. This constituted a reduction from the original
roll value of approximately 60 percent.
At the supervisory hearing on this matter, the
county limited its participation to a statement by the asses-
sor that the material from the county files for the appeal of
the 2009-10 year was accurate (“these records do stand”) but
that “for 2008 there was not a timely appeal and as I stated
the County’s position in these cases is in fact, you know, we
don’t agree to facts for 2008, we didn’t have any facts. There
wasn’t a timely appeal so we just stand by that.”
III. ISSUE
Did the department abuse its discretion in deter-
mining that it would not take supervisory jurisdiction over
this matter?
IV. ANALYSIS
No party disputes that the standard of review in
this case is for abuse of discretion by the department in
deciding, on the basis of the record before the department,
that it would not take supervisory jurisdiction of this matter.
That standard of review is difficult to satisfy, but
a petitioner can do so if it is shown that the action of the
department is arbitrary, capricious, or clearly wrong.
The court cannot conclude that the actions of the
department were arbitrary or capricious. As to whether they
were clearly wrong, the question is whether on the basis
of the record he had before him, the hearing officer was
clearly wrong. To overcome his decision, taxpayer needs to
show he was clearly wrong about whether, as stated in the
378 Oakmont LLC v. Clackamas County Assessor
department’s rule: “the parties to the petition agree to facts
which indicate it is likely that an error exists on the roll.”
OAR 150-306.115 (emphases added).
The case law clearly establishes that the parties need
not agree that there was an error on the roll. The agreement
need only be as to facts so indicating. Ghazi-Moghaddam v.
Dept. of Rev., 20 OTR 288 (2011). The court also observes
that the agreement is in the present tense. It is not required
that it be shown that the parties agreed in the past. The
agreement need only indicate a likelihood of an error having
occurred, it need not conclusively establish the existence of
an error. Finally, a fact that is agreed to, but which occurred
either before or after the entry on the roll of the value in
question is still a fact that can likely indicate an error.
The hearing officer at the supervisory hearing
looked at the record before him and concluded that the
assessor “did not agree to any of the ‘facts’ verbally proffered
concerning the condition of the property as of January 1,
2008.” He went on to acknowledge that the assessor or his
appraiser had recognized that construction defects had been
discovered but discounted that, observing that the “state-
ments do not specify the nature or extent of the construction
defects * * *. Since there is no agreement as to the condi-
tion of the property as of January 1, 2008[,] the agreed fact
that an investigation was conducted is not an indication of a
likely error on the roll.”
The hearing officer observed finally that:
“The only relevant agreement is an ambiguous statement
in a county appraisal prepared three years (February 11,
2011) after the date of value for the tax year in question.
That statement does not account for conditions that existed
at the date of value with sufficient specificity to indicate a
likely error on the roll. The record indicates knowledge and
the extent of the condition of the property was not known
for the tax year in question as of the January 1, 2008[,]
valuation date.”
The approach and conclusion of the hearing offi-
cer was clearly wrong. In the record before him there was
an appraisal of the property conducted by the county that
acknowledged and premised its conclusion of value on the
Cite as 21 OTR 375 (2014) 379
existence of very significant construction or design defects
in the property. While those were discussed in 2011, they
constitute an agreement by the county that defects in design
or construction had occurred. Those defects would have
occurred at or about the time of the construction of the prop-
erty, that is in 1996.
Moreover, the hearing officer had in his record a
stipulated judgment to which the county agreed and which
set the value of the property as of January 1, 2009, at a
60 percent discount from the roll value of the property. The
record before the hearing officer indicated no reason for such
a discount, other than the effects of construction or design
defects that had occurred years before not only the 2009-10
year but also years before the 2008-09 year.
The county’s attempt to vitiate that agreement by
saying that it did not, at the supervisory hearing, agree to
facts misses the point. As taxpayer has argued, the county
had already agreed to critical facts. The appraisal was pre-
pared and submitted to this court and the stipulated judg-
ment was issued long before the supervisory hearing.
Nor are the acknowledgments or agreements equiv-
ocal. They were contained in an appraisal report submit-
ted to this court by two people purporting to be appraisal
experts submitting a report for the purpose of helping this
court reach a determination of value. Although it is the case
that the litigation was as to the immediately subsequent
year (2009-10), the relevant fact was the existence of design
or construction defects for a property constructed several
years before the 2008-09 year.
The hearing officer concluded that knowledge of the
extent of any defects must not have existed prior to January 1,
2008. However, nothing in the department’s rule requires
that parties agree on facts that were known or even know-
able as of a valuation date. The requirement is that there be
agreed upon facts indicating a likelihood of an error exist-
ing on the roll. OAR 150-306.116(4)(b). The agreement to
which the rule makes reference can occur, and often does
occur, after a valuation date has passed.
380 Oakmont LLC v. Clackamas County Assessor
The county clearly agreed that construction and
design defects existed and affected value as of January 1,
2009. The county also implicitly, if not explicitly, agreed that
the defects dated from the time of construction in 1996. This
much more than likely indicates that there was an error
in the roll value and RMV as of January 1, 2008—a roll
value that did not take into account or reflect any reduction
in value attributable to the construction or design defects
affecting the subject property.
Nor is there anything in the record that would
suggest that a 60 percent reduction in value of the subject
property from the 2008-09 year to the 2009-10 year was the
product of general market changes or other factors. Nor is
this is a case where the value differences are minor.
The conclusion reached by the hearing officer was
clearly wrong and the product of an abuse of discretion. It is
much more than likely that the roll value for the property
for the 2008-09 year was in error. The question of the extent
of that error is a question to be addressed in a merits hear-
ing on the matter by the department.
V. CONCLUSION
The motion of taxpayer is granted and the cross-
motions of the department and the county are denied. The
matter is remanded to the department for the purpose of
holding a merits hearing. Now, therefore,
IT IS ORDERED that Plaintiff’s Motion for Sum-
mary Judgment is granted; and
IT IS FURTHER ORDERED that Defendants’
Cross-Motions for Summary Judgment are denied.