Village at Main Street Phase II v. Dept. of Rev.

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.