DocketNumber: TC 2526
Citation Numbers: 10 Or. Tax 369
Judges: <bold>CARL N. BYERS, Judge.</bold>
Filed Date: 2/6/1987
Status: Precedential
Modified Date: 1/13/2023
Decision for defendant rendered February 6, 1987. *Page 370
Plaintiffs are "interested taxpayers" who seek to have the 1986-87 tax levy of defendant declared void (see ORS
1, 2. Prior to 1986, defendant suffered losses for many months. At a Board of Directors' meeting held February 26, 1986, the Board decided that its hospital was no longer a viable business. On April 9, 1986, the Board adopted Findings of Fact and a Proposed Plan for Dissolution and Liquidation pursuant to ORS
Thereupon, the district was dissolved and the Board of Directors became the Board of Trustees with the duty to liquidate the assets and pay the indebtedness of the district. ORS
Extensive efforts were made by the trustees to sell the real property, including advertising it in the Wall Street Journal and sending letters to various hospitals, health care facilities, clinics, churches and other parties whom the Board thought might be interested in the property. No offers were received. Finally, on June 25, 1986, the trustees signed a one-year listing agreement with a real estate broker for the sale of the property. The listing price was $295,000 for the hospital and $150,000 for the clinic.
A 1986-87 budget was prepared "to complete the dissolution and liquidate the Health District." (Defendant's Exhibit CC.) Revenues were forecast, including the sale of the real property and leased equipment. The estimated value of the hospital, $295,000, plus the clinic, $150,000, totaled $445,000. The Board estimated that the first six months' vacancy would decrease the value of the property by $60,000. Subtracting the cost of the sale plus a deduction for "market projections," it was estimated that the district would realize $296,500 from the sale of the real property. The sale of the leased property, estimated at 50 cents on the dollar, was expected to produce revenues of $50,000; therefore, the sale of real property and the leased equipment was estimated to bring $346,500.
3. This amount was reflected in the financial summary appearing in the Notice of Budget Hearing, scheduled for June 25, 1986. (Plaintiff's Exhibit 2.) The financial summary showed total resources were less than the requirements and a figure was included for "taxes necessary to balance budget." Based upon the projected shortfall, the Board of Trustees submitted a tax levy to the Lincoln County Assessor on September 8, 1986.
Plaintiffs contend that the Findings of Fact and the Plan of Dissolution submitted before the election as required by ORS
Plaintiffs apparently confuse the "Findings of Fact" setting out estimated assets and liabilities of the district with the "Plan for Dissolution and Liquidation." The "plan" states:
"Creditors and other debts will be paid as rapidly as possible with cash received from tax payments, accounts receivable payments, and the sale of real and personal property of the District."
The plan then lists the order of priority in which payment will be made and ends with the statement:
"If there are not sufficient monies to satisfy all of the above payment requirements, the balance will be made up by a tax levy for the 1986-87 fiscal year." (Plaintiff's Exhibit 1.)
4. This "plan" remained unchanged, although the Findings of Fact were revised to reflect the events which had occurred since the Findings were prepared in April. The intervening two-and-a-half months had shown the error of the original estimate of the value of the assets. The trustees were faced with ORS
"No change of organization * * * shall impair the rights of any bondholder or other creditor of a district."
It was obvious that the liquidated value of those assets which had been sold plus the appraised value of the real property, which had not been sold, was less than the known liabilities. Therefore, a tax levy was required in order to satisfy the rights of the creditors and bondholders. The court finds that the tax levy was not inconsistent with the Plan of Dissolution. Plaintiffs are understandably disappointed that defendant's finances turned sour, but that alone is not cause to void a tax levy.
Plaintiffs also contend that ORS
The relevant portion of ORS
"If the assets of the district are insufficient to pay the indebtedness, the board of trustees shall levy taxes, within the limits of the authority of the district, for the liquidation of such indebtedness." (Emphasis added.)
5. There is nothing in this language which can be interpreted to mean all assets must be sold before taxes can be levied. To the contrary, it is more subject to the interpretation that the trustees have no discretion but must levy taxes if it appears that the assets will be insufficient.
The legislature did not specify that a levy is required only if the "liquidated" assets of a district are insufficient to pay the indebtedness. The court will not add words that the legislature could have included had that been its intent.
6. Under the Uniform Trustees Powers Act, the general powers of a trustee are set out in ORS
"From time of creation of the trust until final distribution of the assets of the trust, a trustee has the power to perform, without court authorization, every act which a prudent person would perform for the purposes of the trust * * *."
Would a "prudent person" have ordered a forced sale of the real property? The parties agree that such a sale would surely have resulted in a sum less than could be realized given a reasonable time to market the property. The trustees were aware that if a considerable time elapsed between dissolution and the satisfaction of indebtedness, it might trigger creditor action which could result in a forced sale. Testimony was received that in order to forestall such a possibility an estimate of the revenue that could be realized from an orderly liquidation of the real property was included in the assets of the district. Finding that this still resulted in a deficit, a tax levy was submitted to cover the remaining indebtedness. The court finds that this action was within the discretion granted the trustees and the levy so submitted and collected complied with the statutory requirements.
Having found that the tax levy is valid, judgment will be entered dismissing plaintiff's complaint, with prejudice.
Costs to the defendant.