Oakmont LLC v. Clackamas County Assessor

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.