Farmer's Direct, Inc. v. Dept. of Rev.

No. 17 February 3, 2021 399

IN THE OREGON TAX COURT

REGULAR DIVISION

FARMERS DIRECT, INC.,

Plaintiff,

v.

DEPARTMENT OF REVENUE,

Defendant.

(TC 5328)

On a motion for summary judgment, the Department of Revenue (Defendant)

argued that a hay-bailing compression machine was “affixed to” or “erected upon”

the land, making it real property. In response, Farmers Direct, Inc., (Plaintiff)

the owner of the machine, argued that it was “movable” machinery or equipment

that constituted tangible personal property and was therefore exempt from prop-

erty tax under ORS 307.394(1). In order to qualify for an exemption under ORS

307.394(1), an item must be (1) “tangible personal property,” (2) “farm machinery

or equipment,” (3) used primarily for a listed purpose, and (4) generally “moved

or movable in the ordinary course of business.” ORS 307.394; Saunders v. Dept. of

Rev., 300 Or 384, 390, 711 P2d 961 (1985). The court found that the stipulated facts

and exhibits submitted by the parties did not provide a sufficient basis to deter-

mine whether the machine was “tangible personal property” or “moveable in the

ordinary course of business.” The court specifically cautioned against concluding

that a machine or other item automatically becomes real property when bolted to

real property. Therefore, Defendant’s motion for summary judgment was denied.

Oral argument on Defendant’s motion for summary

judgment was held August 6, 2019, in the courtroom of the

Oregon Tax Court, Salem.

Kristen M. Gallino, Assistant Attorney General, Depart-

ment of Justice, Salem, filed the motion for Defendant

Department of Revenue.

Connor J. Harrington, Kevin L. Mannix PC, Salem, filed

the response for Plaintiff.

Decision rendered February 3, 2021.

ROBERT T. MANICKE, Judge.

I. INTRODUCTION

Plaintiff (taxpayer) uses a Steffen Systems Model

4600SP Big Bale Compression System (the Compression

System) in its business of compressing bales of hay and

straw for shipping. Taxpayer seeks exemption from property

400 Farmer’s Direct, Inc. v. Dept. of Rev.

tax for the Compression System under ORS 307.394(1) for

tax years 2016-17 and 2017-18.1 Taxpayer appeals from an

adverse decision from the Magistrate Division. Defendant

Department of Revenue (department) has filed a motion for

summary judgment, which taxpayer resists.

The court will deny the department’s motion.

Although the parties have helpfully stipulated to numerous

facts and have provided other documentary and graphic evi-

dence, those presentations leave factual gaps because they

are based in part on legal theories that the court concludes

conflict with governing law. To apply the governing statutes

as the court construes them, the court will set the case for

trial, preferably after an opportunity to view the Compression

System pursuant to Tax Court Rule (TCR) 56 E. As part of

the analysis in this order, the court identifies additional

areas of factual development that may be relevant.

II. FACTS

The parties have stipulated to a number of facts

and have submitted 11 pages of stipulated photographs and

three videos showing the Compression System in opera-

tion. In addition, taxpayer has submitted three declarations

from an owner and two employees. Solely for purposes of its

motion, the department does not dispute the facts alleged in

taxpayer’s declarations.

Taxpayer is in the business of compressing bales of

hay and straw sourced from the individuals who own tax-

payer and from other farms. Taxpayer uses the Compression

System to compress the large bales produced at the farms

into smaller, much denser, bales to facilitate shipment over-

seas. The Compression System takes up approximately

1,372.2 square feet of space and is housed in a pole barn

that taxpayer leases in Yamhill County. The Compression

System includes the following main components: an infeed

system, a main press, an outfeed system, hydraulic and elec-

tric power units, and a control system. Hay and straw bales

are initially placed into the infeed system which can hold up

to 12 big bales and which severs the bales in two. The main

1

All references to the Oregon Revised Statutes (ORS) are to the 2015 edition

unless otherwise indicated.

Cite as 24 OTR 399 (2021) 401

press compresses the bales lengthwise. The bales are then

wrapped for shipment.

To prevent the Compression System from moving

during operation, (1) the infeed and outfeed systems and

the main press are bolted together; and (2) most of the

Compression System is bolted to the concrete floor.

The Compression System obtains the hydraulic

pressure it requires through 20 separate hydraulic hose

connections. The parties supplied photographs captioned

“Hydraulic plumbing” or “Hydraulic pump.” The depart-

ment characterizes the hydraulic system as “extensive” and

asserts that the Compression System is “hard plumbed into

the hydraulic system of the barn.” Taxpayer supplied a dec-

laration of its General Manager stating that the hydraulic

hoses can be disconnected quickly using basic tools. Taxpayer

asserts that, after being disconnected from the Compression

System, the hydraulic “component” can be moved as one

unit, using skids already attached to its underside.

The Compression System is connected to an electri-

cal power unit that is bolted to the floor and is “hardwired”

to a power panel that is attached to a wall. Taxpayer’s

office manager submitted a declaration stating that this

panel is a dedicated unit that is separate from the panel

that powers the barn lights and barn electricity. A trans-

former located outside the barn was installed to support

electrical power needed for the Compression System and

for the barn generally. The parties supplied photographs

captioned “Electrical panel that services hydraulic pump

and compression machine,” “Electrical panel interior,” and

“Hard-wiring in electrical conduit,” as well as two photo-

graphs of the transformer. The department characterizes

the electrical system as “expansive” and the electrical panel

as “large,” and the department states that there are “elec-

trical lines running from the[ ] [transformer] to the panel

inside the barn, in order to accommodate the electrical

needs of the Compression System.” Taxpayer objects to the

department’s use of the terms “large” and “expansive”; tax-

payer seeks to prove at trial that the power panel is a com-

ponent of the Compression System which will be moved with

it.

402 Farmer’s Direct, Inc. v. Dept. of Rev.

Although it took taxpayer three to four weeks to

install the Compression System, the parties stipulate that

it could be installed at its current location in a couple of

days.2 To move the Compression System from its current

location, the hydraulic and electrical components must be

disconnected, and bolts connecting components together

and connecting the Compression System to the floor must

be removed. Taxpayer’s General Manager testified that his

crew would “shear off” the bolts connecting the feet of the

Compression System to the floor so that holes are not left

behind. Disassembling the various components requires “an

impact gun and other basic tools, a couple of forklifts, trucks

and trailers, and * * * a basic working knowledge of how to

use such tools and equipment.” The parties have stipulated

that the Compression System could be disassembled and

moved “in a day or less.” Taxpayer’s General Manager has

estimated that it will take one to two days to disassemble,

move, and reassemble the Compression System at a new

location, using about six people, the two forklifts already in

use for taxpayer’s operations, and a truck with a flat-bed

trailer system. Taxpayer has not moved the Compression

System since acquiring it, other than to remove the stack-

ing system from the outfeed system component. The parties

have not identified what features or improvements would be

required at a new site before the Compression System could

be installed.

III. LEGAL BACKGROUND

ORS 307.394 exempts from property tax tangible

personal property constituting farm machinery and equip-

ment used for certain purposes:

“(1) The following tangible personal property is exempt

from ad valorem property taxation:

“(a) Farm machinery and equipment used primarily

in the preparation of land, planting, raising, cultivating,

irrigating, harvesting or placing in storage of farm crops;

“(b) Farm machinery and equipment used primarily

for the purpose of feeding, breeding, management and sale

2

The parties stipulate that manufacturing delays prolonged installation.

Cite as 24 OTR 399 (2021) 403

of, or the produce of, livestock, poultry, fur-bearing ani-

mals or bees or for dairying and the sale of dairy products;

“(c) Machinery and equipment used primarily to

implement a remediation plan as defined in ORS 308A.053

for the period of time for which the remediation plan is cer-

tified; or

“(d) Farm machinery and equipment used primarily

in any other agricultural or horticultural use or animal

husbandry or any combination of these activities.”

The statute thus requires an exempt item to be (1) “tangible

personal property,” (2) “farm machinery and equipment,”3

and (3) used primarily for one of the purposes listed in ORS

307.394. Case law adds a fourth requirement, as discussed

below, that the item be “generally * * * moved or movable in

the ordinary course of business.” See Saunders v. Dept. of

Rev., 300 Or 384, 390, 711 P2d 961 (1985).4

Most of the parties’ arguments relate to the first

requirement, that an item be “tangible personal proper-

ty.”5 Oregon classifies locally assessed property such as the

Compression System as either “personal property” or “real

property.”6 See ORS 307.020 (defining “personal property”);

ORS 307.010 (defining “real property”). Personal property is

either “tangible personal property” or “intangible personal

property,” but of the two, only “tangible personal property” is

subject to assessment and taxation. See ORS 307.010(1) (defi-

nitions); ORS 307.030(2) (intangible personal property not

3

Neither party asserts that the Compression System is “[m]achinery and

equipment used primarily to implement a remediation plan” as specified in para-

graph (c) of ORS 307.394(1).

4

The court also phrased the fourth requirement as requiring the item to be

“designed to be moved in the ordinary course of business.” Id.

5

The department states that it has limited its motion by challenging solely

taxpayer’s position that the Compression System is “tangible personal property.”

However, both parties also discuss the “ordinary course of business” requirement

articulated in Saunders, and the court treats that requirement as included in the

scope of the department’s motion.

6

Most property, including the Compression System, is assessed “locally” by

a county assessor; the definitions analyzed in this case apply to locally assessed

property. By contrast, property used in certain utility, transportation, and other

businesses listed in ORS 308.515(1) is assessed “centrally” by the department,

and a different set of definitions applies to centrally assessed property. See, e.g.,

ORS 308.505(14) (defining “property” for purposes of central assessment).

404 Farmer’s Direct, Inc. v. Dept. of Rev.

subject to assessment or taxation unless centrally assessed).

Neither party asserts that the Compression System includes

any intangible personal property; therefore, the choice in

this case is binary: the Compression System is either “tan-

gible personal property” or “real property.”

The department argues that the Compression

System is “real property” and therefore not “tangible per-

sonal property.” The court follows that sequence in its

analysis, in part because the statutory definition of “real

property” is the older of the two and thus is part of the con-

text in which the legislature defined “tangible personal

property.” As of the tax years at issue in this case, ORS

307.010(1)(b)(B) defines “real property,” in relevant part, as

follows:

“ ‘Real property’ includes * * * [a]ll buildings, structures,

improvements, machinery, equipment or fixtures erected

upon, above or affixed to the land * * *.”

ORS 307.020(1)(c) defines “tangible personal property” as

follows:

“ ‘Tangible personal property’ includes but is not limited

to all chattels and movables, such as boats and vessels, mer-

chandise and stock in trade, furniture and personal effects,

goods, livestock, vehicles, farming implements, movable

machinery, movable tools and movable equipment.”

IV. ISSUES

(1) Is the Compression System “affixed to” or “erected upon”

the land under ORS 307.010(1)(b)(B), or is it “movable”

machinery or equipment under ORS 307.020(1)(c)?

(2) If “movable” machinery or equipment, is the Com-

pression System generally moved or movable in the

ordinary course of business, or designed to be moved

in the ordinary course of business, as required under

ORS 307.394?

(3) Is the Compression System a “farming implement”

within the meaning of ORS 307.020(1)(c)?

Cite as 24 OTR 399 (2021) 405

V. STANDARDS OF REVIEW

This division of the court reviews a magistrate deci-

sion de novo based on the record developed in this division.

ORS 305.425(1); see also ORS 305.501(6). The court grants

a motion for summary judgment only if “the pleadings * * *

declarations, and admissions on file show that there is no

genuine issue as to any material fact and that the moving

party is entitled to prevail as a matter of law.” TCR 47 C.

See Christensen v. Dept. of Rev., 23 OTR 155 (2018) (citing

Two Two v. Fujitech America, Inc., 355 Or 319, 331, 325 P3d

707 (2014)). “No genuine issue as to a material fact exists

if, based upon the record before the court viewed in a man-

ner most favorable to the adverse party, no objectively rea-

sonable [factfinder] could [find] for the adverse party on the

matter that is the subject of the motion for summary judg-

ment.” TCR 47 C. “A material fact is ‘one that, under appli-

cable law, might affect the outcome of a case.’ ” Ghiglieri v.

Tomalak, 304 Or App 717, 718, 469 P3d 262 (2020) (quoting

Zygar v. Johnson, 169 Or App 638, 646, 10 P3d 326 (2000),

rev den, 331 Or 584 (2001)). The adverse party has the bur-

den of producing evidence on any issue raised in the motions

as to which the adverse party would have the burden of per-

suasion at trial. Id. The party seeking affirmative relief—in

this case, taxpayer as claimant of an exemption from tax—

bears the burden of proof at trial. ORS 305.427. The court

will construe the statutes supporting exemption strictly

but reasonably. See Habitat for Humanity v. Dept. of Rev.,

350 Or 257, 261 n 1, 381 P3d 809 (2016) (citing Eman. Luth.

Char. Bd. v. Dept. of Rev., 263 Or 287, 291, 502 P2d 251

(1972)).

VI. ANALYSIS

The court begins by analyzing the meanings of

“erected upon, above or affixed to the land,” and “movable,” as

used in the statutory definitions of “real property” and “tan-

gible personal property,” respectively. The court starts with

the real property terms because the legislature adopted them

first, in 1907, and those terms thus form context for the defi-

nition of “tangible personal property,” which the legislature

adopted in 1935 and amended in 1959. After reviewing the

text, context, and (where available and helpful) legislative

406 Farmer’s Direct, Inc. v. Dept. of Rev.

history of those terms, the court considers relevant cases

interpreting them. As part of its review of cases, the court

considers the second issue, namely, the requirement under

Saunders that exempt farm machinery and equipment be

designed to be “moved in the ordinary course of business.”

300 Or at 390. The court summarizes its principal conclu-

sions in a separate section after the case analysis. Finally,

the court analyzes whether the Compression System is a

“farming implement” within the meaning of ORS 307.020(3)

and addresses remaining arguments.

A. Is the Compression System “affixed to” or “erected upon”

the land under ORS 307.010(1)(b)(B), or is it “movable”

machinery or equipment under ORS 307.020(1)(c)?

The department argues that the Compression System

is “affixed to” or “erected upon” the land; taxpayer argues

that it is “movable” machinery or equipment. The department

asserts that the fact that the Compression System is bolted

to the concrete floor of the barn suffices to treat it as “affixed

to” land and thus real property. The department stated in its

motion that “[taxpayer] affixed the Compression System to

real property when it bolted the Compression System to the

cement floor of the barn”; The department’s attorney stated at

oral argument that “the Compression System that’s at issue

here—as stipulated to by the parties—is bolted to the con-

crete floor of the building in which it’s housed. * * * [T]hat

alone is sufficient for the court to find in the [d]epartment’s

favor on this motion.” Taxpayer disagrees with this position,

claiming that additional facts are relevant. The legislature

has not defined any of the three terms at issue. Therefore, the

court applies the analytical steps set forth in State v. Gaines

to discern their meaning, starting with the text and context of

each statute, proceeding to the legislative history to the extent

useful, and consulting general maxims of statutory construc-

tion to the extent the legislature’s intent remains unclear.

346 Or 160, 171-72, 206 P3d 1042 (2009). The text analysis

begins with the plain meaning because courts “assume that

the legislature intended words of common usage to be given

their ordinary meanings.” OR-OSHA v. CBI Services, 356 Or

577, 589, 341 P3d 701 (2014). The court will next determine

whether the term has a specialized or technical meaning that

Cite as 24 OTR 399 (2021) 407

differs from the plain meaning and determine whether the

legislature intended to use the term in that different, tech-

nical sense. EAN Holdings, LLC v. Dept. of Rev., 24 OTR 200

(2020) (citing DCBS v. Muliro, 359 Or 736, 745-46, 380 P3d

270 (2016)). For purposes of determining both the plain and

technical meanings, the court will consult contemporaneous

dictionaries. Comcast Corp. v. Dept. of Rev., 356 Or 282, 296

n 7, 337 P3d 768 (2014) (stressing importance of consulting

dictionary definitions contemporaneous with enactment of

the statute).

1. Plain and technical meanings of “affixed to the land”

The legislature first added “affixed to” and “erected

upon” to the definition of “real property” for property tax

purposes in 1907. See Or Laws 1907, ch 268, § 2 (HB 89).

That law provided, in pertinent part:

“The terms land, real estate, and real property, as used

in this act, shall be construed to include the land itself,

whether laid out in town lots, or otherwise, above and under

water, all buildings, structures, substructures, superstruc-

tures, and improvements erected upon, under, or above, or

affixed to the same, and all rights and privileges thereto

belonging or in any wise appertaining * * *.”

(Emphases added.)

The contemporaneous Webster’s definition of “affix” is:

“1. To subjoin, annex, or add at the close or end; to append

to; to fix to any part of; as, to affix a syllable to a word;

to affix a seal to an instrument; to affix one’s name to a

writing.

“2. To fix or fasten in any way; to attach physically. * * *

“3. To attach, unite, or connect with; as, names affixed to

ideas, or ideas affixed to things; to affix a stigma to a per-

son; to affix ridicule or blame to any one [sic].

“4. To fix or fasten figuratively; –with on or upon; as, eyes

affixed upon the ground.

“Syn. – To attach; subjoin; connect; annex; unite.”

Webster’s Int’l Dictionary of the English Language 29 (unabridged

ed 1907) (italics in original; boldface and example omitted).

408 Farmer’s Direct, Inc. v. Dept. of Rev.

“Affixed” had an established legal meaning as well.

Contemporaneous entries in Black’s Law dictionaries are

from 1891 and 1910. Although there was no definition in

the 1891 edition for “affix,” “affixus” was defined as “affixed,

fixed, or fastened to.” Black’s Law Dictionary 50 (1st ed

1891). The 1910 edition of Black’s defined “affix” as:

“To fix or fasten upon, to attach to, inscribe, or impress

upon, as a signature, a seal, a trade-mark. Pen. Code N. Y.

§ 367. To attach, add to, or fasten upon, permanently, as in

the case of fixtures annexed to real estate.

“A thing is deemed to be affixed to land when it is attached

to it by the roots, as in the case of trees, vines, or shrubs;

or imbedded in it, as in the case of walls; or permanently

resting upon it, as in the case of buildings; or permanently

attached to what is thus permanent, as by means of cement,

plaster, nails, bolts, or screws. Civ. Code Cal. § 660; Civ.

Code Mont. 1895, § 1076; McNally v. Connolly, 70 Cal. 3,

11 Pac. 320; Miller v. Waddingham (Cal.) 25 Pac. 688, 11

L. R. A. 510.”

Black’s at 48 (2d ed 1910) (emphases added). The legal defi-

nition connotes an attachment that is “permanent[ ].” That

definition also provides that an item may become “affixed to

land” not only by directly adhering to the land in a certain

way, but also, alternatively, by being affixed to a second item

that has been affixed directly to the land. The second para-

graph from the 1910 edition of Black’s quoted above lists

three ways an item can be affixed to land through direct

contact with the land: by roots, by becoming embedded in

the land, or by permanently resting upon the land. The ital-

icized language then adds that an item is “deemed to be

affixed to land” when the item is permanently attached to

“what is thus permanent,” i.e., attached to any of the first

three affixed items by means such as cement, plaster, nails,

bolts, or screws.

The court considers whether the legislature intended

to use “affixed” in a technical legal sense, or in the more

general sense found in Webster’s. By 1907, Oregon courts had

adjudicated numerous disputes regarding whether particu-

lar items that originated as personal property had become

real property, and a recurring question was whether the

object had become “affixed” or “annexed” to real property.

Cite as 24 OTR 399 (2021) 409

See, e.g., Alberson v. Mining Co., 39 Or 552, 558, 65 P 978

(1901) (“It is next insisted that the property in controversy,

being affixed to the mine, became a part of the realty, and

therefore insusceptible of incumbrance by a chattel mort-

gage.”); Helm et al. v. Gilroy et al., 20 Or 517, 521, 26 P 851

(1891) (mortgage case; intention to make item a “permanent

accession to the freehold” inferred from “the nature of the

article affixed” and other evidence); see generally O. R. & N.

Co. v. Mosier, 14 Or 519, 13 P 300 (1887) (eminent domain

case; previously installed railway tracks, ties, and other

structures “affixed” by railroad company did not become

“fixtures” because railroad company was “clothed with the

power of the state” and installed the items for a public pur-

pose). Whether an item had been affixed or annexed to real

property was the first element of the three-part common-law

test to determine whether the item had lost its character as

personal property and become real property:

“(1) Real or constructive annexation of the article in ques-

tion to the realty; (2) appropriation or adaptation to the use

or purpose of that part of the realty with which it is con-

nected; (3) the intention of the party making the annex-

ation, to make the article a permanent accession to the

freehold, this intention being inferred from the nature of

the article affixed, the relation and situation of the party

making the annexation, the policy of the law in relation

thereto, the structure and mode of the annexation, and the

purpose or use for which the annexation has been made.”

Roseburg Nat. Bank v. Camp, 89 Or 67, 74, 173 P 313 (1918)

(citing the “celebrated case” of Teaff v. Hewitt, 1 Oh St 511

(1853), adopted by Henkle v. Dillon, 15 Or 610, 614, 17 P 148

(1888)).7

7

Although the three components of the test for real property were well set-

tled, the meaning of “fixture” was ambiguous. The 1910 edition of Black’s defined

“fixture” first as a “personal chattel substantially affixed to the land, but which

may afterwards be lawfully removed therefrom by the party affixing it, or his

representative, without the consent of the owner of the freehold.” Black’s at 503

(2d ed 1910). Under the second definition, however, a fixture was “[c]hattels which,

by being physically annexed or affixed to real estate, become a part of and acces-

sory to the freehold, and the property of the owner of the land.” Id. The closing

paragraph of the lengthy definition describes the first meaning as referring to a

“removable” fixture that remains personal property, and the second as referring

to an “irremovable” fixture that has become real property. Id. “Fixture,” standing

alone, could have either of these opposite meanings.

410 Farmer’s Direct, Inc. v. Dept. of Rev.

The court considers the legislature to have been

aware of this substantial body of case law. See Blanchana,

LLC v. Bureau of Labor & Industries, 354 Or 676, 691,

318 P3d 735 (2014) (“We presume that the legislature was

aware of existing [common] law[.]”). If the legislature had

intended to avoid using a legal term of art, it could have

listed specific methods of attachment, such as “nailed,

bolted, screwed, glued, or similarly attached.” Alternatively,

the legislature could have qualified the term, for example

by adding “whether permanently or temporarily,” or “not-

withstanding the law of fixtures.” The court ascribes to the

legislature an intention to use “affixed” in its technical legal

sense.

The court concludes that the legislature intended

to use the technical meaning of “affixed,” i.e., permanently

fixed, attached, or fastened—such as by cement, plaster,

nails, bolts, or screws—to the land, or to a second item that

is embedded in the land or permanently rests upon the land.

2. Plain and technical meanings of “erected upon” the

land

The court now turns to the meaning of “erected

upon.” As relevant here, the contemporaneous definition of

“erect” in Webster’s is:

“1. To raise and place in an upright or perpendicular posi-

tion; to set upright; to raise; as, to erect a pole, a flagstaff,

a monument, etc.

“2. To raise, as a building; to build; to construct; as, to erect

a house or a fort; to set up; to put together the component

parts of, as of a machine.”

Webster’s at 506 (unabridged ed 1907) (italics in original). The

plain meaning suggests that the 1907 legislature intended to

classify as real property “all buildings, structures, substruc-

tures, superstructures, and improvements” that were raised

or constructed on (or under, or above) the land. “Erect” and

derivations had a technical legal meaning as well. The 1891

edition of Black’s defined “erection” as “Raising up; building;

a completed building. In a statute on the ‘erection’ of wooden

buildings, this term does not include repairing, alteration,

Cite as 24 OTR 399 (2021) 411

enlarging, or removal.”8 Black’s Law Dictionary 429 (1st ed

1891). The 1910 Black’s definition of “erect” and “erection”

were the same as the 1891 definitions. Compare id., with

Black’s at 434 (2d ed 1910). The court finds no difference com-

pared to the plain meaning. An item was erected upon land

if it was constructed or put together on land.

3. Context and legislative history of “erected upon,

above or affixed to the land”

The context of the 1907 definition of real property

for property tax purposes includes prior laws it amended

or replaced, in addition to contemporaneous case law.

See Blanchana, LLC, 354 Or at 691 (case law); State v.

Ziska / Garza, 355 Or 799, 806, 334 P3d 964 (2014) (“Analysis

of the context of a statute may include prior versions of the

statute, including any wording changes in a statute over

time[.]” (Internal citations omitted.)). Before 1907, “real

property” was defined for property tax purposes as:

“not only the land itself, whether laid out into town lots

or otherwise, with all things contained therein, but also

all buildings, structures, improvements, trees and other

fixtures of whatever kind thereon, and all rights and privi-

leges belonging or in any wise appertaining thereto.”

General Laws of Oregon, § 1, p 295 (1903) (amending sec-

tion 3057 of Bellinger and Cotton’s Annotated Codes and

Statutes of Oregon) (emphasis added); see also General Laws

of Oregon, Taxes, ch LIII, title I, § 2, p 893 (Deady 1845-

1864); General Laws of Oregon, Taxes, ch LVII, title I, § 2,

p 748 (Deady 1843-1872). The 1907 amendment thus replaced

the list consisting of “buildings, structures, improvements,

trees” and “other fixtures” with a list consisting of “build-

ings, structures, substructures, superstructures, and

improvements” that are “affixed to” the land.

The court has considered whether, by referring to

items “affixed” to land instead of referring to “fixtures,” the

legislature may have intended to adopt only the common-law

requirement of physical annexation, ignoring the elements

8

The 1891 edition of Black’s included a definition of “erect,” but the court

finds it inapplicable. Id. at 429 (“[O]ne of the formal words of incorporation in royal

charters. ‘We do, incorporate, erect, ordain, name, constitute, and establish.’ ”).

412 Farmer’s Direct, Inc. v. Dept. of Rev.

of “adaptation” to the land and the “intention” of the person

affixing the item, thereby avoiding the definitional ambi-

guities associated with the term “fixtures.” See Seven-Up

Bottling Co. of Salem v. Dept. of Rev., 10 OTR 400, 404 (1987)

(rejecting application of three-part common-law test of fix-

tures on grounds of administrability). The court has found

no evidence of such an intention, however. The court has

examined Oregon Supreme Court decisions predating the

1907 definition. In all such cases involving property,9 the

Oregon Supreme Court used the term “affix” only as part

of an analysis of whether an item had become real property

by virtue of its permanent attachment to land, applying the

common-law test. See, e.g., Honeyman v. Thomas, 25 Or 539,

541, 36 P 636 (1894) (“[I]t cannot be determined from the

method of attachment that it was the intention of the par-

ties to permanently affix the derrick to the freehold.”); Helm,

20 Or at 522 (describing third element of test as “the inten-

tion of the party making the annexation to make the article

a permanent accession to the freehold, this intention being

inferred from the nature of the article affixed”); Henkle 15

Or at 614 (Plaintiffs’ sole legal basis to subject portable saw-

mill and engine to its mortgage “is, that they were affixed to

the soil, and became part of the realty, and are subject to the

same rules of law as the soil itself.”).10 Finally, as discussed

below, the court finds it significant that the legislature

9

Other than a signature or a corporate seal “affixed” to a document, or a

penalty “affixed” to an act.

10

The only legislative history that the court has found suggests that the

legislature in 1907 was primarily concerned with housing the definition of “real

property” in a freestanding statute; the court sees no indication that the legis-

lature intended to deviate materially from the prior definition, which used the

term “fixtures” and was embedded in a statute—section 3057 of the Bellinger

& Cotton compilation—that described the duties of assessors. See Report of the

Board of Commissioners Appointed Under the Provisions of Chapter 90, Laws

of 1905, for the Purpose of Examining and Reporting on Matters of Assessment

and Taxation, etc. at 89 (June 30, 1905), available at https://archive.org/details/

reportboardcomm00mulkgoog/page/n 5 (accessed Jan 20, 2021) (“1906 Oregon

Report”). The legislature commissioned the 1906 Oregon Report to analyze

and propose reforms to Oregon’s tax system. The report focuses on other top-

ics, including central assessment and pervasive undervaluation, but its bill pro-

posals include a freestanding definition of “real property,” which the legislature

adopted verbatim as section 2 of the 1907 act. See 1906 Oregon Report at 89. The

report’s commentary states that the bill language is taken in part from the prior

law, which was comparable to Minnesota’s definition. The only “new” language

that the commentary identifies relates to the inclusion of “franchises” as taxable

property. See id.

Cite as 24 OTR 399 (2021) 413

reinstated the word “fixtures” (as well as “machinery” and

“equipment”) into the definition of “real property” in 1935 in

the same bill that also defined “tangible personal property.”

See Or Laws 1935, ch 274, § 2.11

As a last point of context relevant to the presen-

tation of this case on summary judgment, the court notes

the detailed attention early Oregon Supreme Court deci-

sions gave to the manner in which machinery and equip-

ment in particular was attached to the land. For example,

in Henkle the items at issue were a “12 horse-power traction

self-steering engine” that “stood on wheels” and a portable

“double saw-mill * * * together with all saws, tools, belts, or

appurtenances in anywise connected therewith[.]” 15 Or at

611. The plaintiffs claimed that the engine and sawmill had

been “affixed to the soil” and thereby become part of the real

property that secured a mortgage they held as mortgagees.

11

Or Laws 1935, ch 274, § 2, amended Oregon Code, title LXIX, ch I, § 69-102

(1930):

“Sec. 69-102. The terms ‘land,’ ‘real estate’ and ‘real property[,]’ [as used

in this act] shall be construed to include the land itself, [whether laid out in

town lots, or otherwise,] above or under water, and all buildings, structures,

[substructures, superstructures and] improvements, machinery, equipment

or fixtures erected upon, under, [or] above[,] or affixed to the same, and like-

wise all mines, minerals, quarries and trees in, under or upon the land; also

all water rights and water powers and all other rights and privileges [thereto

belonging or] in any wise appertaining to the land; also any estate, right, title

or interest whatever in land or real property, less than the fee simple[; and].

“[New ¶] In all cases where the grantor of land or real property has,

in the deed or instrument [conveying the same] of conveyance, reserved or

conveyed any or all of the timber standing upon such land, with the right to

enter upon the ground and remove said timber, the ownership of the stand-

ing timber so reserved or conveyed shall be deemed, and hereby is declared

to be, an estate and interest in land or real property; also, in all cases where

the grantor of land or real property has, in the deed or instrument of con-

veyance, reserved or conveyed the right to enter upon and use any or all of

the surface ground necessary for the purpose of exploring, prospecting for,

developing or otherwise extracting any gold, silver, iron, copper, lead, coal,

petroleum, gases, oils or any other metals, minerals or mineral deposits [of

any nature whatever] in or upon said land, such [mineral reservation] right

shall be deemed[,] and [is] hereby is declared to be[,] an estate and interest

in land[; and also all franchises and privileges granted by or pursuant to any

law of this state, or municipal ordinance or resolution, owned or used by any

person or corporation, other than the right to be a corporation; also all water

rights and water powers; and all mines, minerals, quarries, fossils and trees

in, under or upon the land.] or real property.”

(Italics signify added language; brackets and strike-through signify removed

language.)

414 Farmer’s Direct, Inc. v. Dept. of Rev.

Id. at 614. The defendants claimed that the engine and saw-

mill remained personal property. The court described how

the machinery was placed on the premises:

“The engine was held in place by three blocks that were

sitting on the sills. The floor was laid right around them

so that they couldn’t move on the floor. Two of these blocks

had grooves cut in the top so that they could fit the hind

axle of the engine, and the front block was cut in a circle

to fit the front end of the boiler, and the engine was sitting

on those blocks. * * * The engine was connected to * * * [the]

portable, double circular saw-mill, by means of a 10-inch

rubber belt, running from the fly-wheel of the engine to a

pulley on the mandrel of the mill. The engine was in no way

attached to the premises on which it stood. The saw-mill

machinery was all connected to a square frame[.] * * * This

frame was set on the floor of the building, and four bolts

came up from the floor at each corner of the frame, and

went through a block which was laid across the corner of

the frame, and screwed down in such a manner as to clamp

the frame so it would not move around.”

Id. at 612-13. The court also described in detail the fre-

quent relocation of the property, which was dependent on

the nature and availability of work. See id. at 613-14. After

reciting the three-part test to determine whether a “chattel”

has received the “character of a fixture” and been rendered

“immovable,” the court concluded that, “considering the por-

table character of these chattels, the purposes and manner

of their use, the way they were annexed * * *, this machinery

in question never lost its character as chattels[.]” Id. at 614-

16; see also Honeyman (discussed below).

The court concludes that the 1907 legislature did

not intend to use the term “affixed” to refer solely to the

manner of physical attachment, or to create a bright-line

test separate from the law of fixtures. Rather, to determine

whether an article has been “affixed” to the land, it is also

necessary to examine objective evidence of whether the

party making the annexation intended to make the article

a permanent accession to the land. The court bases this con-

clusion on the finding that the legislature intended the term

to have its legal meaning, the fact that the legal definition

referred to “permanen[t]” attachment to land, the Supreme

Cite as 24 OTR 399 (2021) 415

Court’s prior use of the term as part of the common-law test,

and the absence in the legislative history of any indication

to break from prior law.

Turning to the phrase “erected upon,” the court has

found no contemporaneous cases or other sources of context

that shed more light on the plain meaning.

4. Plain or technical meaning of “movable”

The legislature first used the term “movable”

in property tax law in 1935, when it enacted the original

definition of “tangible personal property” for property tax

purposes:

“The term ‘tangible personal property’ means and includes

all chattels and movables, such as boats and vessels, mer-

chandise and stock in trade, furniture and personal effects,

goods, livestock, vehicles, farming implements, movable

machinery, tools and equipment; also all improvements

made by persons on lands claimed by them under the laws

of the United States, the fee of which lands is still vested in

the United States.”

Or Laws 1935, ch 274, § 3.12

At the time, Webster’s provided two entries for “mov-

able,” one as an adjective and one as a noun. In pertinent

part, the definition of the adjective form was:

“2. Capable of being moved, lifted, carried, drawn, turned,

or conveyed, or in any way made to change place or posture;

12

Before 1935, Oregon Code, title LXIX, ch I, § 69-103 (1930), listed “chat-

tels,” “goods,” and other tangible items within the definition of “personal prop-

erty,” along with certain kinds of intangibles; there was no separate definition of

“tangible personal property”:

“The terms ‘personal estate’ and ‘personal property’ shall be construed to

include all things in action, household furniture, goods, chattels, moneys,

and gold dust, on hand or on deposit; all boats and vessels, whether at home

or abroad, and all capital invested therein; all debts due or to become due

from solvent debtors, whether on account, contract, note, mortgage, or other-

wise, either within or without this state; all public stocks; all bonds, war-

rants, and moneys due or to become due from this state, or any county or

other municipal subdivision thereof; and stocks and shares in incorporated

companies, and such proportion of the capital of incorporated companies lia-

ble to taxation on their capital as shall not be invested in real estate; and all

improvements made by persons on lands claimed by them under the laws of

the United States, the fee of which lands is still vested in the United States.”

416 Farmer’s Direct, Inc. v. Dept. of Rev.

susceptible of motion; not fixed or stationary; as, a movable

steam engine.

“* * * * *

“Syn. – Movable, Mobile. That is movable which may be

moved, esp. from one place to another; that is mobile which

is characterized by great facility, flexibility, or responsive-

ness of movement[.]”

Webster’s Second at 1604 (unabridged ed 1934) (boldface omit-

ted). In pertinent part, the definition of the noun form was:

“2. An article of wares or goods; esp., and now only, an arti-

cle of furniture; * * *

“* * * * *

“4. Law. A Rom. & Civil Law. A subject of property which

is of such a nature as to admit of being moved from place

to place without injury; a subject of property not attached

to the soil * * *. Strictly, movables are limited to tangible

objects, but the term is sometimes used to include choses

in action. In a general way movables correspond to the

personal property of English law; but the two terms are

not synonymous, some forms of personal property, such as

growing crops, rent, etc., not being movables.”

Id. (boldface omitted). As relevant here, The Oxford English

Dictionary defined “movable” as “apt or disposed to move-

ment; quick or ready in movement; having a tendency to

move” and, as relating to property specifically, “admitting of

being removed or displaced; applied to ‘personal’ as opposed

to ‘real’ property.” The Oxford English Dictionary 725 (1933).

“Movable” and “movables” also had established legal

meanings. Black’s defined “movable” as “that which can be

changed in place, as movable property.” Black’s at 1209 (3d

ed 1933). Black’s defined “movables” as:

“[T]hings movable; movable or personal chattels, which

may be annexed to or attendant on the person of the owner,

and carried about with him from one part of the world to

another. 2 Bl. Comm. 387. Movables consist—First, of inan-

imate things, as goods, plate, money, jewels, implements

of war, garments, and the like or vegetable productions, as

Cite as 24 OTR 399 (2021) 417

the fruit or other parts of a plant when severed from the

body of it, or the whole plant itself when severed from the

ground[.]

“Movables are further distinguished into such as are in

possession, or which are in the power of the owner, as a

horse in actual use, a piece of furniture in a man’s own

house; and such as are in the possession of another, and

can only be recovered by action, which are therefore said to

be in action, as a debt.”

Id. (italics in original). The court does not see a substan-

tive difference between the plain meaning and the techni-

cal legal meaning. The court concludes that the noun “mov-

ables” referred to tangible objects that are not attached to

real property, and that the adjective “movable” referred to

an object’s tendency to move or ability to be moved because

the object is not fixed in place or attached to real property.

In 1959, the legislature added two new instances of

the word “movable” to the statute.13 The 1959 amendment

read as follows:

“(3) ‘Tangible personal property’ means and includes

all chattels and movables, such as boats and vessels, mer-

chandise and stock in trade, furniture and personal effects,

goods, livestock, vehicles, farming implements, movable

machinery, movable tools and movable equipment [and all

machinery and equipment used in the manufacture of raw

or partially manufactured products].”

13

After 1935 and before 1959, the legislature made two other changes. A

1939 law extended the definition of “tangible personal property” to include all

machinery and equipment used in manufacturing, an extension that the legisla-

ture retracted in 1959 as discussed in this order:

“The term ‘tangible personal property’ means and includes all chattels and

movables, such as boats and vessels, merchandise and stock in trade, fur-

niture and personal effects, goods, livestock, vehicles, farming implements,

movable machinery, tools and equipment and all machinery and equipment

used in the manufacture of raw or partially manufactured products; also all

improvements made by persons on land claimed by them under the laws of

the United States, the fee of which lands still is vested in the United States.”

Or Laws 1939, ch 450, § 1 (SB 456) (italics signify added language). In addition,

before the codification of the ORS in 1953, the legislature removed the phrase

following the semicolon referring to improvements on federal land. See former

ORS 307.020(3) (1953), renumbered as ORS 307.020(1)(c) (2005).

418 Farmer’s Direct, Inc. v. Dept. of Rev.

Or Laws 1959, ch 82, § 1 (strikethrough indicates deleted

text; italics indicates inserted text).14 The plain meaning

of “movable” did not materially change between 1935 and

1959.15 The court has found no change to the technical legal

meanings of “movable” and “movables.” Compare Black’s at

1209 (3d ed 1933), with Black’s at 1165 (4th ed 1957).

Based on the plain and technical meanings of the

term, the court tentatively concludes that the legislature

intended to classify as tangible personal property machin-

ery and equipment that is capable of being moved because it

is not fixed in place or attached to real property.

5. Context and legislative history of “movable”

Statutory context includes not only other contempo-

raneous statutes and court opinions in existence, but also

other provisions of the same bill containing the term in ques-

tion. See Hon. Jack L. Landau, Oregon Statutory Construction,

97 Or L Rev 583, 640 (2019) (“The idea that the legislature

was likely aware of other parts of the ‘same statute’ refers

to other parts of the same bill[.]”) (citing State v. Ortiz, 202

Or App 695, 698-700, 124 P3d 611 (2005)). As noted, in the

same 1935 law the legislature both used the term “movable”

in the definition of “tangible personal property” and added

the term “fixtures” back to the definition of “real property.”

Early cases applying the common law of fixtures used the

term “movable” (or its opposite “immovable”) to characterize

an item that has retained its character as personal prop-

erty despite some degree of annexation to real property. For

example, in a suit to enforce a mechanic’s lien, the court held

that a derrick or crane erected by the lessee of a stone quarry

14

The statute was not changed again until 2005, when it was renumbered

and the phrase “means and includes” was replaced by “includes but is not limited

to.” Or Laws 2005, ch 94, § 30. The legislature intended that change to be nonsub-

stantive. See Or Laws 2005, ch 94 (“Relating to correction of erroneous material

in Oregon tax law”).

15

The adjective form of “movable” in Webster’s was:

“2 a : capable of being moved : not fixed : not stationary * * * : not restricted to

one position or location * * *[.]

“b of property (1) : that can be removed or displaced and that is thus usu[ally]

personal rather than real * * *[.]

Webster’s Third New Int’l Dictionary 1471 (unabridged ed 1961). The noun form

of “movable” in Webster’s was “a piece of property (as an article of furniture) that

can be removed or displaced : a movable piece of property[.]” Id.

Cite as 24 OTR 399 (2021) 419

did not become real property although it was held in place by

guy ropes attached to stakes and anchor bolts embedded in

rock. Honeyman, 25 Or at 541. Regarding the mode of attach-

ment, the court found that the guy ropes merely steadied the

derrick. Id. The court found no evidence in the lease indicat-

ing an intention that the derrick would become real prop-

erty, and the court found that the lessee would likely need

to move the derrick as portions of the quarry became played

out. Id. In its legal analysis, the court described the derrick

alternately as “movable,” a “movable appliance,” a “movable

fixture[ ],” and a “trade fixture * * * within the removable

class.” Id. at 541-43 (quoting in part Leonard v. Stickney, 131

Mass 541, 541 (1881) (“The object, the effect and the mode of

annexation are all to be considered in determining whether

any specific articles are movable fixtures.”)); see also Henkle,

15 Or at 614 (“to give a chattel the character of a fixture, and

to render it immovable, three things are necessary”); 16 Or

Op Atty Gen 674 (1934) (quoting Henkle and Leonard).

Later cases more often used the term “removable”

(or “irremovable”) rather than “movable.” See, e.g., Roseburg

Nat. Bank, 89 Or at 74 (“The line between removable and

irremovable fixtures is sometimes so close and difficult to

ascertain that it is impossible to frame a precise, unbending,

and infallible rule which can be applied to all cases.”); see

also Donald Ross Marshall, The Law of Fixtures in Oregon,

19 Or L Rev 152 (Feb 1940) (surveying cases). However, as of

1935, Oregon’s bulk sales law referred to “movable store and

office fixtures” as among the items whose sale could trigger

the requirement of a notice to creditors, if part of a pur-

chase of goods in bulk or of “substantially all of the fixtures

or equipment” used in the business. See Oregon Code, title

LXIV, ch 1, § 64-101 (1930) (requiring notice before purchase,

inter alia, of “all or substantially all of the fixtures or equip-

ment * * * including movable store and office fixtures”).16

16

“Movable” also appeared in the definition of “motor vehicles” in the motor

vehicle code: “ ‘Motor vehicles’ shall include all vehicles, engines or machines,

movable or immovable, which are operated or propelled by combustion of gaso-

line, distillate or other volatile and inflammable liquid fuels.” Oregon Code, title

LV, ch XV, § 55-1501 (1930) (emphasis added). Finally, Oregon Code, title XVIII,

ch XIV, § 18-1408 (1930), required beekeepers to house honeybees in hives with

“movable” frames, as opposed to hives that were “mere boxes without movable

frames.” This requirement apparently facilitated inspection for disease and

for purposes of property tax assessment. See Oregon Code, title XVIII, ch XIV,

420 Farmer’s Direct, Inc. v. Dept. of Rev.

From this context, the court concludes that the

1935 legislature likely intended the term “movable” to have

the same meaning as in reported court decisions: The term

required an analysis of the facts indicating the manner and

degree of attachment to real property, as well as the remain-

ing factors of the common-law test to the extent applicable

in the circumstances.

The statutory context of the 1959 amendments, as

explained in portions of the legislative history, adds a small

amount of background.17 As noted above, the legislature in

1939 broadened the definition of “tangible personal prop-

erty” to include “all machinery and equipment used in the

manufacture of raw or partially manufactured products.”

Or Laws 1939, ch 450, § 1 (SB 456). The 1959 amendments

undid this expansion. Minutes from committee hearings

indicate that the purpose of the 1959 legislation was to

“amend the definitions of real property and personal prop-

erty to provide that all fixed machines and equipment shall

be deemed real property.”18 Minutes, Senate Committee on

Taxation, Jan 22, 1959 (SB 58). One apparent reason for the

change was to simplify the jobs of assessors by reclassifying

as real property items that since 1939 had been required to

be treated as tangible personal property—despite the fact

that they were affixed to real property—thereby restoring

the prior, “customary” legal classification:

“During the period when the personal property tax off-

set was available under the corporation excise tax laws,[19]

certain machinery used in manufacturing processing was

classified as personal property even though affixed to the

building or ground. Such property would now be classified

only as realty, but, as a matter of policy, the legislature

§§ 18-1401 - 18-1411 (1930) (regulating hive infection control and property taxa-

tion of hives).

17

The parties did not provide legislative history for the 1935 act, and the

court has found none.

18

Taxpayer, which supplied the legislative history of the 1959 amendments

at the court’s request, represented that audio recordings of the 1959 legislative

committee proceedings are not available.

19

The “offset” functioned as a credit against income tax. See Saunders, 300

Or at 390 (“The corporate taxpayer in Warm Sprgs. Lbr. Co. [v. Tax Comm’n, 217

Or 219, 342 P2d 143 (1959),] sought to have the buildings classified as tangible

personal property so that it could receive an offset against its corporate excise

tax for personal property tax paid.”).

Cite as 24 OTR 399 (2021) 421

allowed it to be classified as personalty in order to give

the personal property tax offset to the owners. With the

elimination of the personal property tax offset except as to

inventories there seems no reason why the law should not be

returned to its former status and the customary legal classi-

fications restored, inasmuch as this will aid assessors and

appraisers in their work.”

Id. (emphases added); see also Minutes, House Committee

on Taxation, Feb 20, 1959 (SB 58) (“[T]his bill, which rede-

fines fixed machinery and equipment used in manufacture

as real property * * * would facilitate the work of the asses-

sors, who now have to make three segregations in their

appraisals of such property.”); Minutes, House Committee

on Taxation, Feb 25, 1959 (SB 58) (explaining that SB 58

“redefines fixed machinery and equipment used in manufac-

ture as real property”). To effect this change, the legislature

deleted the 1939 text that had expanded the definition to

include “all machinery and equipment used in the manu-

facture of raw or partially manufactured products,” and the

legislature added the requirement that any tools or equip-

ment be “movable.”

The court interprets the 1959 reference to the “cus-

tomary legal classifications” as simply reiterating that, con-

sistent with the common law of fixtures, an article is real

property if it is “affixed” to real property, and it is personal

property if it is “movable.”

6. Cases distinguishing between real property and per-

sonal property for property tax purposes20

The court first reviews the relevant cases, then

draws overall conclusions in a summary below.

20

The parties extensively discuss definitions of the statutory terms set

forth in the department’s administrative rules. Neither party suggests that the

department promulgated these rules pursuant to a specific delegation of legisla-

tive authority. Cf. ORS 305.100(1) (“The Department of Revenue shall make such

rules and regulations it deems proper to regulate its own procedure and to effec-

tually carry out the purposes for which it is constituted.”). As with many admin-

istrative rules, the rules proffered in this case are interpretive and, while doubt-

less useful as summary guidance on the relevant case law and administrative

practice, cannot supersede the statutes. See Avis Rent A Car System, Inc. v. Dept.

of Rev., 330 Or 35, 51, 995 P2d 1163 (2000) (holding that the department’s rules

were interpretive and invalid to the extent conflicting with statute). The court

focuses on construing the statutes and applying any relevant judicial decisions.

422 Farmer’s Direct, Inc. v. Dept. of Rev.

The first Oregon opinion that discusses the defi-

nitions of real and tangible personal property for property

tax purposes does not aid the analysis in this case because

the court’s legal conclusions made it unnecessary to apply

the classifications. In First National Bank v. Marion County,

169 Or 595, 130 P2d 9 (1942), which involved tax years

1929 to 1939, the taxpayer was a national bank that occu-

pied a building as lessee. See id. at 597-99. As a national

bank, its personal property was immune from property tax.

Id. at 597. The assessor classified a vault door, chandeliers,

and various other items as “trade fixtures” and “equipment,”

but assessed them to the bank as real property, asserting

various legal theories. See id. at 600-03. The court rejected

the assessor’s position as a matter of law, because there was

no evidence that the bank held any interest in real property

other than as a lessee, and no statute at the time provided

that the mere ownership of trade fixtures creates a sepa-

rate taxable interest in real property. Id. at 616. The court

declined to decide whether the trade fixtures and equipment

in question were real property or personal property for prop-

erty tax purposes. Id. at 615-16. The court also declined to

decide whether the trade fixtures and equipment could be

taxed to the owner/lessor of the real property as “fixtures

annexed to or improvements of” real property, which the

assessor had not attempted to do. Id. at 615. Thus, although

the opinion examines in significant detail the manner in

which the vault door and frame were attached to the build-

ing, the custom in the banking industry of removing and

replacing vault doors despite their substantial weight, and

the manner of attachment of the chandeliers, the opinion

does not apply the statutory definitions of real and tangible

personal property. See id. at 600.

In the second case, the Oregon Supreme Court con-

strued the definition of “tangible personal property” as appli-

cable to certain tax years from 1947 through 1955. Warm

Sprgs. Lbr. Co. v. Tax Comm’n, 217 Or 219, 221-22, 342 P2d

143 (1959) (Warm Springs Lumber). At issue was whether

the taxpayer was eligible for the income tax “offset” for prop-

erty tax paid with respect to “tangible personal property” as

discussed above. Id. The taxpayer, which engaged in logging

and lumber manufacturing on leased land, claimed that

Cite as 24 OTR 399 (2021) 423

“buildings” consisting of a “ ‘sawmill, dry kilns, lanning mill,

factory, warehouse and sorting sheds’ ” were tangible per-

sonal property. Id. at 223 (quoting taxpayer’s factual allega-

tions). These buildings had no solid footings but for the most

part rested on concrete posts. Id. The taxpayer also claimed

that about 40 temporary dwellings for workers were tangi-

ble personal property. Id. The taxpayer had entered into an

agreement with the landowner, the Confederated Tribes of

the Warm Springs Reservation of Oregon, providing in part

that any improvements placed on the land by the taxpayer

would remain the taxpayer’s property and that the taxpayer

may remove them within two years after expiration of the

lease. Id. The court found it “entirely clear” that the build-

ings and structures were “erected upon land.” Id. at 224. For

that reason, the court concluded that they constituted real

property and not tangible personal property as defined in

ORS 307.010 and ORS 307.020, respectively. Id. Accordingly,

the court denied the income tax offset.

The court in Warm Springs Lumber considered

the taxpayer’s argument that the buildings were personal

property because the taxpayer’s lease allowed the taxpayer

to remove them. Id. at 225. The court concluded, however,

that the agreement was not binding on a taxing author-

ity because a taxing authority is not a party to the agree-

ment. Id. (“[T]here are numerous instances in which [the

rule respecting the parties’ classification by agreement]

does not hold good where the rights of third persons are

involved.”).21 As authority for the third-party rule, the court

cited a California Supreme Court decision, which in turn

cited longstanding cases from a variety of jurisdictions. Id.

(citing Trabue Pittman Corp. v. Los Angeles County, 29 Cal

2d 385, 396, 175 P2d 512 (1946) (“[T]he agreement of the

21

Later Oregon cases cited Warm Springs Lumber for this rule and used

principles from the common law of fixtures to determine the character of the

disputed property for property tax purposes. See Shields v. Dept. of Rev., 266 Or

461, 470-71, 513 P2d 784 (1973) (allowing assessment of tenant-installed ceilings,

plumbing, heating and air conditioning equipment, and electrical wiring as real

property even though characterized as personal property in lease; stating it is

“not reasonable that the landlord would desire the tenant to remove” items of

that character); Moore & Paulson v. Dept. of Rev., 4 OTR 573, 577-78 (1971) (treat-

ing taxpayer’s house as real property although the house had been moved to the

property, and merely rested upon a concrete slab; citing three-factor common-law

test for real property).

424 Farmer’s Direct, Inc. v. Dept. of Rev.

parties, whether express or implied, is not binding upon

the taxing authorities.” (Citing cases.))). The court in Warm

Springs Lumber also mentioned two other specific rationales

that the California court articulated in Trabue Pittman:

(1) a California statute defined “improvements” as real prop-

erty and defined “fixtures” as improvements; and (2) the

common law of fixtures treated a tenant’s trade fixtures as

real property until removed. Id. at 226. The court in Warm

Springs Lumber did not specifically mention an additional

ground that the Trabue Pittman court discussed at some

length, namely, the California attorney general’s argument

that “the interest of uniformity of taxation should require

* * * that trade fixtures be characterized as real property for

taxation purposes, and not as personal property as held by

the trial court.” Trabue Pittman, 29 Cal 2d at 392. The court

in Trabue Pittman stated:

“Just as assessors are not bound by private agreements,

they should not be frustrated or hindered in performing

their vital functions by the necessity of ferreting out the

often undisclosed and secret intentions of lessors and les-

sees relative to the terms of a lease. For the most part,

assessors must be allowed to act on the basis of outward

appearances. * * *

“* * * * *

“* * * Disregard of any distinction between improve-

ments installed by tenants and improvements installed by

an owner of property insofar as taxation is concerned expe-

dites the work of the assessor and tends toward uniformity.”

Id.

In Bylund v. Dept. of Rev., 9 OTR 76 (1981) this court

considered the classification of “housedrops,” which are televi-

sion cable and related hardware running from a utility pole

to and into a cable subscriber’s home and terminating in a

wall outlet. Id. at 77. The county assessor had been assessing

housedrops to the local cable companies as personal property.

Id. at 78. One company challenged that treatment, claiming

that the housedrops had become real property and should be

part of the assessment to homeowners. Id. at 78-79. Nothing

in the agreement between the cable company and the home-

owner addressed ownership, control, or final disposition of the

Cite as 24 OTR 399 (2021) 425

housedrop. Id. at 78. This court held that the housedrops were

real property based on the three-part common-law test. See

id. at 79-83. As to the first two elements, the court readily

concluded that the cable and hardware had been annexed to

real property and were adapted to the portion of the homes

to which they were connected. Id. at 80 (citing Roseburg

National Bank, 89 Or at 74). The court considered the third

element, whether the cable company that originally made the

annexation intended to make the housedrops a “permanent

accession to the freehold.” Id. (quoting Roseburg National

Bank, 89 Or at 74). To discern the company’s intention, the

court relied on objective facts revealing “ ‘the nature of the

article affixed, the relation and situation of the party making

the annexation, the policy of the law in relation thereto, the

structure and mode of the annexation and the purpose or use

for which the annexation has been made.’ ” Id. at 80 (quoting

Roseburg National Bank, 89 Or at 74). The court stated that a

conclusion that property is a fixture does not end the analysis.

Trade fixtures removable without substantial injury to the

building may be taxable as personal property, but the result

ultimately depends on an intention to make the fixtures per-

manent. Id. at 82-83. Although the cable agreement was silent

about the classification of the housedrops, the court also cited

Warm Springs Lumber for the proposition that such an agree-

ment would not bind an assessor in any event. Id. at 83. Some

evidence weighed in favor of treating the cable company as

owner of the housedrops (for example, the company repaired

or replaced components as needed at its own expense), but the

court found it significant that the cable company had a clear

motivation to leave housedrops in place when subscribers

moved, enabling the company to recruit the new homeowner

to become a subscriber for a modest “reconnection” fee. Id. at

82. The court found that removal of a housedrop would likely

damage the real property, requiring minimal exterior repairs

but “quite possibly substantial repairs” to the interior, with

the result that the company would likely abandon the interior

material. Id. Thus, the court concluded that the housedrops

were real property because they were “fixtures” that could not

be removed without substantial injury to the premises.

In Seven-Up Bottling Co. of Salem v. Dept. of Rev.,

the taxpayer argued that machinery and equipment used

426 Farmer’s Direct, Inc. v. Dept. of Rev.

to bottle soft drinks (fluid tanks, air compressors, heaters,

water treatment and a palletizing machine) constituted tan-

gible personal property and was thus eligible to be depre-

ciated, rather than subject to the annual trending of value

generally applied to real property. 10 OTR at 401 & n 1.

The court viewed the issue as whether the machinery and

equipment were “movable” within the meaning of former

ORS 307.020(3),22 renumbered as ORS 307.020(1)(c) (2005),

as opposed to “affixed” or “erected upon” real property.

Id. at 407. After reviewing the parties’ arguments regard-

ing the appropriate legal standard, the court concluded that

“machinery, tools and equipment which are nailed, bolted,

screwed or glued to real property are not ‘movable’ within

the meaning of the statute.” Id. The court reached this con-

clusion by applying the principle of ejusdem generis to the

list of items in the definition of “tangible personal prop-

erty,” observing that, “[a]s a general rule, the specific types

of items listed in the statute are not ‘affixed’ to anything.”

Id. According to the court, the department’s administra-

tive rule appropriately captured the concept of “movable”

in the phrase “ ‘readily movable as opposed to apparently

stationary or fixed items.’ ” Id. The court expressly rejected

the “ ‘three-prong’ test of annexation, adaptation and inten-

tion” usually applied in the law of fixtures as a means of

determining whether an article is real or personal property.

Id. at 404. Criticizing Bylund, and quoting from the passage

in Trabue Pittman reprinted above, the court stated that

“the common law test * * * is generally inconsistent with the

statute.” Id. at 405.

The court in this case cautions against a literal

reading of Seven-Up Bottling to mean that any machine,

tool or item of equipment automatically becomes real prop-

erty merely by being “nailed, bolted, screwed or glued to real

property.” Seven-Up Bottling predated the analytical frame-

work announced in PGE v. Bureau of Labor and Industries,

317 Or 606, 611-12, 859 P2d 1143 (1993), as modified in

Gaines. See Tektronix, Inc. v. Dept. of Rev., 354 Or 531, 543-

46, 316 P3d 276 (2013) (finding error in this court’s statutory

analysis stemming from failure to apply Gaines framework).

22

The court did not indicate to which edition of the ORS it cited.

Cite as 24 OTR 399 (2021) 427

As a result, the court in Seven-Up Bottling did not consider

whether the legislature used the terms “movable” and

“affixed” in a technical legal sense; it did not consider the

context of existing case law in which the legislature used

the terms; and it instead turned to the maxim of ejusdem

generis to interpret them. See Seven-Up Bottling at 403-04

(referring to “natural and obvious” meanings of terms; ana-

lyzing department’s rule); Gaines, 346 Or at 172 (resort to

maxims appropriate if legislative intent remains unclear

after examining text, context, and any helpful legislative

history); DISH Network Corp. v. Dept. of Rev., 364 Or 254,

272 n 21, 434 P3d 379 (2019) (characterizing ejusdem generis

as maxim). The court in this case has been unable to find

any such bright-line rule in an examination of the text, con-

text and available legislative history of the statutes or in the

words of the Oregon Supreme Court.

Likewise, it would be a mistake to rely on Seven-Up

Bottling to reject all aspects of the three-part common-law

test, or all of the case law that has applied the common law of

fixtures. Neither Warm Springs Lumber nor Trabue Pittman

rejected the common-law test. Both of those courts applied

the rule that a private agreement as to the character of prop-

erty does not apply to a third-party taxing authority, but

that rule is itself a longstanding part of the common law of

fixtures. See Trabue Pittman, 29 Cal 2d at 397 (citing cases);

see also Marshall, 19 Or L Rev at 166 (“A subsequent mort-

gagee, lienor, or purchaser of the realty upon which the arti-

cle is affixed, who had no notice of the agreement, will not be

affected thereby, but as to him, the article will be treated as a

fixture. * * * [T]o hold otherwise would render uncertain land

titles, endanger the rights of purchasers, and afford opportu-

nities for fraud, since the agreement is unrecorded and in the

nature of a secret lien.” (Footnotes omitted.)); see also Moore

& Paulson v. Dept. of Rev., 4 OTR 573, 577 & n 1 (1971) (citing

common-law test; relying on Warm Springs Lumber in treat-

ing building as real property). The same rationale informs

the common-law requirement that evidence of an “intention”

to affix property permanently must be objective; a property

owner’s subjective intention to move property does not con-

trol. See Marshall, 19 Or L Rev at 160 (“secret, personal,

psychological, and subjective intention with which [property]

428 Farmer’s Direct, Inc. v. Dept. of Rev.

is affixed” is not controlling (footnote omitted)). The court in

this case recognizes that the legislature created statutory

definitions of “real property” and “tangible personal prop-

erty,” and that the legislature was free to deviate from the

common-law definitions of those terms in doing so. Warm

Springs Lumber, 217 Or at 226 (“It is well settled * * * that

for purposes of taxation the definitions of real property in

the revenue and taxation laws of the state control whether

they conform to definitions used for other purposes or not.”

(Quoting Trabue Pittman, 29 Cal 2d at 393 (internal quo-

tation marks omitted).)). However, the court concludes that,

by using the terms “affixed” and “movable” without enacting

separate definitions of those terms, and by reinstating the

term “fixtures” in 1959, the legislature expressed an inten-

tion to apply, rather than deviate from, the meanings that

those terms had under common law.

Despite concerns about the statement of the legal

test in Seven-Up Bottling, the court in this case views the

factual analysis in Seven-Up Bottling as a valid and useful

model to determine the underlying facts relevant to whether

property is “movable” or “affixed” to real property. After a

trial and a viewing of the property to better understand

the evidence, the court found that most of the machinery

and equipment at issue was “integrated and interrelated by

pipes, wiring and conveyors as [was] necessary to process

and produce plaintiff’s product.” 10 OTR at 401. The court

further found:

“Some of the equipment, such as the large bottle washer,

the palletizer and some conveyors are not attached to the

building but merely rest in place by virtue of their weight.

However, these items are attached to other equipment such

as conveyors, pipes or wiring. Some equipment is attached

to the building by bolts or screws, but, as plaintiff points

out, it could be removed without significant damage to the

building. In some areas the building has been modified to

accommodate the conveyors, pipes and heating ducts which

pass through the walls or the roof.”

Id. The court held that, with a few exceptions, the machin-

ery and equipment was real property:

“[M]ost of the subject property is ‘affixed’ or ‘erected upon’

real property. Most of the equipment is bolted or screwed to

Cite as 24 OTR 399 (2021) 429

the walls, ceilings or floor and attached by pipes, ducts and

conduits. This equipment is not moved except when modify-

ing the operational layout. In fact, movement of the equip-

ment would be inconsistent with the operation and function

it performs. Movement would usually result in misalign-

ment, leaks and faulty application of the products. The very

purpose of the small bolts and screws plaintiff refers to is

to prevent movement.”

Id. at 407-08. Similarly, the court held that a large stain-

less steel tank was real property because it was not “mov-

able” due to its attachment by “solid plumbing connections”

and its weight and bulk. Id. at 408. By contrast, the court

held that some smaller tanks “not connected with plumb-

ing connections but drained through flexible rubber hoses,”

were personal property because they were “readily movable”

within the room or the plant. Id. The factual discussion thus

reveals a careful examination of the manner of attachment

to real property (not only with bolts and screws, but also via

pipes and conduits), modifications of the building that were

necessary to accommodate the equipment, the possibility of

damage to the building upon removal, and the degree of care

required to dismantle and reassemble the equipment with-

out causing leaks. A similar level of thoroughness is likely

necessary in any case involving large or complex machinery

or equipment.

7. Cases under statutes exempting farm machinery and

equipment

While the foregoing cases involved solely the statu-

tory definitions of real and tangible personal property, two

cases involved both of those statutes as well as the statutory

predecessor of the farm machinery and equipment exemp-

tion now in ORS 307.394. In Saunders, the taxpayer sought

exemption for two items under the predecessor of ORS

307.394,23 arguing that the items were “movable equipment”

23

The exemption statute at issue in Saunders and Columbia River Egg Farm

v. Dept. of Rev., 12 OTR 418 (1993) (discussed below) was former ORS 307.400(3)

(1985), renumbered, in part, as ORS 307.394 (2001). See Saunders, 300 Or at 388.

That statute exempted “inventory,” defined nonintuitively to include “tangible

personal property” that is “[f]arm machinery and equipment” used for speci-

fied purposes, including the planting, raising, cultivating, or harvesting of farm

crops. See Or Laws 1973, ch 670, § 3 (inserting “farm machinery” into defini-

tion of “inventory” in former ORS 310.608(3), renumbered as ORS 307.400 (1981);

430 Farmer’s Direct, Inc. v. Dept. of Rev.

as required by former ORS 307.020(3) (now ORS 307.020(1)(c)).

300 Or at 389-90. The items at issue were “Harvestores,”

which the court repeatedly described as “structures,” simi-

lar in appearance and use to silos. Id. at 386, 387, 390. The

Harvestores were 20 feet in diameter; one was 33 feet tall

and the other was 77 feet tall, and both were bolted to a two-

foot-thick concrete pad. Id. The taxpayer argued that the

Harvestores were “movable” because they could be unbolted,

moved, and erected someplace else. Id. at 387. The court

disagreed, stating that “even though the Harvestores are

‘movable’ in the sense that the bolts can be removed and the

structure moved to another location, they are not ‘movable’

under ORS 307.020(3), nor are they ‘inventory’ under ORS

307.400.” Id. The court thus reached a conclusion not only

under the definitional statutes, but also under the exemp-

tion statute.24

In its conclusion under the statutory definitions

of tangible personal property and real property, the court

stated that the Harvestores were “structures or improve-

ments ‘erected upon * * * or affixed to the [land]’ within

the meaning of ORS 307.010(1).” Id. at 390. The court com-

pared the Harvestores to the “buildings and structures” in

Warm Springs Lumber, which the court also had concluded

were real property. Id. In reaching its conclusion under the

exemption statute, the court reviewed the legislative his-

tory of former ORS 307.400(3) (1977), finding that the legis-

lature intended that the exemption for farm machinery and

equipment apply only to items “designed to be moved in the

Or Laws 1977, ch 819, § 1 (adding requirement that “inventory” be “tangible per-

sonal property” as explained in Saunders, 300 Or at 388-89); ORS 307.400 (1981)

(noting recodification of former ORS 310.608 (1979)). In 2001, the legislature cre-

ated ORS 307.394 and moved much of the text related to exemption for farm items

from ORS 307.400(3) to that new freestanding exemption statute, which omits any

reference to “inventory.” See Or Laws 2001, ch 753, §§ 12, 15. The court considers

the discussion in Saunders pertaining to the legislature’s intent regarding former

ORS 307.400 (1985) and former ORS 310.608 (1977) to be precedential and bind-

ing for purposes of this court’s analysis of ORS 307.394. See Dept. of Rev. v. New

Friends of the Beaverton City Library, 23 OTR 512, 516 (2019) (“[T]his court, as a

lower court, is bound to follow [Oregon Supreme Court decisions.]”).

24

The court also rejected the taxpayer’s argument that his agreement with

the manufacturer that the Harvestores “ ‘shall at all times be and remain per-

sonalty’ ” controlled. Id. at 390-91. Citing Warm Springs Lumber, the court stated

that the agreement “does not override the terms of a statute that must be fol-

lowed by the Department of Revenue * * *.” Id. at 391.

Cite as 24 OTR 399 (2021) 431

ordinary course of business.” Id. at 390 (“Whatever the result

might be if only ORS 307.020(3) were involved, the legisla-

tive history of ORS 307.400(3) shows that the legislature, in

creating the exemption, intended to exempt described per-

sonal property that generally is moved or movable in the

ordinary course of business.”).25 Although the court was sat-

isfied that Harvestores “can be and occasionally are moved,”

either after being dismantled or in one piece with the aid

of a “silo mover,” the taxpayer presented no evidence that

Harvestores are moved in the ordinary course of business—

the only evidence involved Harvestores moved after foreclo-

sure on a conditional sales contract or upon the sale of a

farm without a Harvestore. Id. at 390 & n 1.

Eight years after Saunders, this court applied the

“ordinary course of business” requirement to machinery and

equipment at a chicken egg farm. Columbia River Egg Farm

v. Dept. of Rev., 12 OTR 418 (1993). This court held that the

cages (“confinement systems”), the feeding, watering and

waste removal conveyors and piping associated with them,

and the equipment in the adjacent and connected processing

plant, were not “ ‘moved or movable in the ordinary course of

business.’ ” Id. at 421 (quoting Saunders, 300 Or at 390). The

court found that the confinement systems were “integrated

into or with their buildings”:

“The evidence established that the confinement systems in

some instances are bolted to the floor and in all instances

are connected to the buildings with pipes, conveyors and

wires. Each moving part is carefully aligned in relation-

ship to the building. The automatic feeding system augers

feed from the permanently affixed feed bins outside the

building through tubes into the building where it is fed

into the traveling hopper. The manure removal conveyors

are carefully arranged so the manure drops into the trench

where the conveyor moves it outdoors. Needless to say, the

conveyors for the collection and movement of the eggs are

25

The department cites Saunders for the proposition that the definition of

“tangible personal property” in ORS 307.020(1)(c) includes only property that is

“movable in the ordinary course of business.” Based on the portion of Saunders

quoted above, the court finds that characterization overly broad. The court con-

cludes that Saunders applied the “ordinary course of business” requirement only

to the category of tangible personal property for which an exemption is sought

under what is now ORS 307.394.

432 Farmer’s Direct, Inc. v. Dept. of Rev.

likewise carefully aligned and coordinated. The efficiency

of the equipment relies upon the automated features of its

operation. Movement of the equipment is inconsistent with

its intended use and would disrupt all aspects of the [auto-

mated] process.

“Although the confinement systems may not be of enor-

mous weight, certainly their bulk and shape do not admit to

easy movability. The evidence showed they must be disas-

sembled to moved. While this is relatively simple, it is time

consuming. * * * Finally, the electrical panels, plumbing con-

trols and connections are incorporated into the buildings.”

12 OTR at 421-22. As to the processing equipment, which

was connected to the confinement systems by egg conveyors,

the court likewise found that the equipment was integrated

into the processing plant building. The court held that the

conveyor equipment was not “movable” because it would be

required to be disconnected from piping, venting and “hard

electrical lines,” and the disconnection would render it inop-

erable. Id. at 422. The washing system used a water soft-

ening system and a boiler that were “clearly affixed to and

part of the real property.” Id. Accordingly, none of the sub-

ject property was eligible for exemption as tangible personal

property constituting farm machinery and equipment.

8. Summary of conclusions as to whether the Compressor

System is “movable,” “erected upon, above or affixed

to the land,” or “designed to be moved in the ordi-

nary course of business” under ORS 307.020, ORS

307.010, and ORS 307.394

Applying the foregoing statutory analysis and review

of cases to the Compressor System, the court concludes as

follows. First, the court agrees with the department that the

phrase “erected upon” is of little help in this case. Ignoring

activities on water or in midair, literally any item to be “con-

structed” or “put together” will undergo that process on land

or on other real property, including obvious movables such

as a do-it-yourself bookcase. The original usage in 1907

applied to “buildings, structures, substructures, superstruc-

tures, and improvements,” but those items typically also

would have been “affixed” in the sense of “imbedded in [the

land], as in the case of walls; or permanently resting upon

Cite as 24 OTR 399 (2021) 433

[the land], as in the case of buildings.” Black’s at 48 (2d ed

1910). Warm Springs Lumber and Moore & Paulson applied

“erected upon” to buildings, but those cases did not involve

machinery or equipment.

Second, under the legal meaning of “affixed” dis-

cussed above, the reference to “the land” in the phrase

“erected upon, above or affixed to the land” includes any

other real property. For example, a window frame is affixed

to the “land” by virtue of its attachment to walls, which

are attached to a concrete foundation, which is attached to

the land. The foundation is “imbedded” in the land, while

the walls and window frame are “permanently attached to

what is thus permanent.” Black’s at 48 (2d ed 1910). This

leads the court to reject an alternative argument that tax-

payer has made in this case, that the Compression System

is real property only if it is affixed to or erected upon the

land itself. In its supplemental brief, taxpayer argued that

“[T]he Compression System has no connection to the land.

* * * The Compression System is isolated from the land, it is

merely located on a barn floor. * * * The Compression System

is not real property because of its lack of connection to the

land.”26

Third, contrary to the department’s position, the

fact that the Compressor System is attached to real prop-

erty by bolts does not necessarily mean that it is real prop-

erty. The department in its motion stated that “Farmers

affixed the Compression System to real property when it

bolted the Compression System to the cement floor of the

barn” and cited OAR 150-307-0010(2)(b)(B). When the leg-

islature used the terms “affixed to” and “movable,” it was

not writing on a blank slate. Each term had an established

26

The court notes further that the legislative history of the 2003 law sub-

stituting “the land” in place of “the same” confirms that the change was non-

substantive. See Staff Measure Summary, House Committee on Revenue, HB

2424, Mar 3, 2003) (“legal definitions are not redefined in this bill”; bill “updates

syntax and adjusts language to make it more consistent across existing stat-

utes”); Tape Recording, Senate Committee on Revenue, HB 2424, Mar 3, 2003,

at 34:57-35:45 (statement of Legislative Revenue Officer Paul Warner), available

at http://records.sos.state.or.us/ORSOSWebDrawer/Record/4179826# (“Each

interim, Legislative Counsel goes through the tax statutes and tries to revise

them in a way that changes the syntax, gets rid of obsolete statutes, reorders a

number of things, and this is their work for the last interim, HB 2424. There are

no substantive policy changes in the bill despite its size.”).

434 Farmer’s Direct, Inc. v. Dept. of Rev.

legal meaning within the context of the law of fixtures, and

there is no indication that the legislature intended to devi-

ate from those established meanings. “Affixed” and “mov-

able” functioned as opposites and as labels, respectively, for

real property and tangible personal property. In the absence

of a separate, bright-line test specifically for property tax

purposes, the classification of property as tangible personal

property or real property is intensely factual, and the court

must make the determination with a full understanding

of the physical relationship between the items at issue and

any real property, including objective indications of whether

the person who affixed the property intended to make it a

permanent accession to the land. Especially when the prop-

erty at issue is machinery or equipment, as opposed to the

“structures” at issue in Saunders or the “buildings” at issue

in Warm Springs Lumber, evidence that an item is bolted to

a floor may not, in and of itself, necessarily establish that

the item is “affixed” to real property or is not movable “in

the ordinary course of business.”27 See Honeyman, 25 Or

539 (quarry derrick not real property despite attachment by

guy ropes); Henkle, 15 Or 610 (engine and sawmill not real

property despite attachment by bolts and screws); Saunders,

300 Or at 390 (finding that Harvestores were “designed to

permit removal” despite being bolted to concrete, but finding

no evidence that Harvestores were “designed to be moved in

the ordinary course of business”).

Fourth, taxpayer’s subjective intention to move or

remove the Compressor System in the future does not con-

trol its classification. Objective facts determine whether tax-

payer, as the system’s original installer, intended to affix it

permanently at its present site. The parties have adduced

a number of facts relevant to this inquiry, including the

time, equipment, and manpower needed to disassemble

27

The court notes the following statement in Saunders: “ORS 307.010(1)

does not require permanence; it only requires that the structure be erected upon

or affixed to the land.” 300 Or at 390 (emphasis added). Although an intention

to “permanently” affix an item to the land is one of the factors in applying the

common-law test, the Supreme Court did not otherwise discuss the common-law

test. For that reason, this court does not read the sentence in Saunders as a

direction to reject the common-law test. If anything, the court’s citation to Warm

Springs Lumber on the next page was itself a reliance on the common-law rule

that parties’ characterization of property by agreement is not binding on taxing

authorities or other third parties. See Saunders, 300 Or at 390-91.

Cite as 24 OTR 399 (2021) 435

and move the Compressor System, the manner in which it

would be detached from the barn’s concrete floor, and tax-

payer’s installation of the electrical and hydraulic systems.

Additional relevant facts would include clearer evidence of

the extent to which the hydraulic system is connected to

systems in place at the current site, the cost of those sys-

tems, the likelihood of finding a suitable alternative site,

and detail about the time and expense to improve and pre-

pare the site, including installation of property needed to

support the Compression System’s hydraulic and electrical

systems.

Fifth, under ORS 307.394, the Compressor System

must not only fit the definition of “tangible personal prop-

erty” under ORS 307.020(1)(c); it also must be “designed to

be moved in the ordinary course of business.” See Saunders,

300 Or at 389-90. Evidence relevant to this requirement

would include data showing whether and how often buyers

of the same or similar items of machinery and equipment

move them in the course of their business, including but not

limited to moves timed to follow any local cycles of cutting or

baling, or of preparation for export. Cf. Saylor v. Enterprise

Electric Co., 110 Or 231, 233, 222 P 304 (1924), reh’g den,

110 Or 231, 223 P 725 (1924) (describing “custom” of farmers

to move hay derricks from field to field and farm to farm).

Moves due to extraordinary events such as foreclosure are

not relevant. Given the court’s reference in Saunders to

the “design” of the property, evidence showing whether the

Compressor System includes features that facilitate disas-

sembly, relocation and reassembly would be relevant as well.

Evidence of any need for post-move adjustments and related

down time would be relevant, based on the court’s obser-

vations of mechanical complexity in Seven-Up Bottling and

Columbia River Egg Farm.28

28

The court disagrees with the department’s assertion at oral argument that

Columbia River Egg Farm requires the Compression System to be movable “while

in operation.” The department’s counsel stated that “moved or movable in the

ordinary course of business means movement while in operation according to

* * * the Columbia River Egg Farm case.” The court reads that case as concluding

that a machine that would require extensive down time and adjustment follow-

ing a move may not be considered movable in the ordinary course of business.

However, the court does not believe that machinery that has been held “movable,”

such as a portable sawmill, must literally be “in operation” while in transport.

See Henkle, 15 Or at 613-14 (explaining that portable sawmill was often moved

436 Farmer’s Direct, Inc. v. Dept. of Rev.

Based on this understanding of the statutes and

cases, questions of material fact remain as to the first two

issues. The court will therefore deny summary judgment

and set the case for trial on those issues.

B. Is the Compression System a “farming implement”?

Taxpayer argues in the alternative that the

Compression System is a “farming implement” under ORS

307.020(1)(c). The court applies the Gaines analysis to that

term.

1. Text

Like the term “movable,” “farming implements”

entered Oregon property tax law in the 1935 act that first

defined “tangible personal property.” Or Laws 1935, ch 274,

§ 3 (amending the term “tangible personal property”). The

Webster’s definition of “implement” was:

“1. An article, as of apparel or furniture, serving to equip;

also, a tool, utensil, etc., forming part of equipment for

work[.]

“* * * * *

“Syn. – Implement, tool, utensil, instrument agree in sug-

gesting relatively simple construction and personal manipu-

lation. Implement is the broadest term, frequently implying

that by which any operation is carried on; tool commonly

suggests the implements of a craftsman or laborer[.]”

Webster’s Third at 1250 (unabridged ed 1934) (emphasis

added; boldface omitted). The Oxford English Dictionary’s

definition of “implement” was:

“1. Pl. Things that serve as equipment or outfit, as house-

hold furniture or utensils, ecclesiastical vessels or vest-

ments, wearing apparel or ornaments, etc.

“* * * * *

“2. Pl. The apparatus, or set of utensils, instruments, etc.

employed in any trade or in executing any piece of work;

now chiefly in agricultural implements or as a synonym of

‘tools’; frequent as a generic term for the tools, weapons,

etc. used by savage or primitive man[.]”

between uses); see also Saylor, 110 Or at 233 (describing hay derricks as “movable

implements” that were customarily transported between uses in fields).

Cite as 24 OTR 399 (2021) 437

Oxford English Dictionary at 94 (supplement to first ed 1933)

(boldface omitted).

A technical legal meaning existed as of 1935.

Black’s defined “implements” as “such things as are used or

employed for a trade, or furniture of a house. * * * Whatever

may supply wants; particularly applied to tools, utensils,

vessels, instruments of labor; as, the implements of trade or

of husbandry.” Black’s at 924 (3rd ed 1933). The court sees

no substantive difference between the plain and technical

meanings. These definitions show that “implement” at that

time was synonymous with “tool.”

2. Context

Contemporaneous case law is sparse,29 but a 1924

opinion of the Oregon Supreme Court in a personal injury

case describes a “hay derrick” as an “implement” in the con-

text of farm activity:

“[F]or the purpose of stacking their hay the farmers of the

district make general use of movable implements known as

hay derricks. In harvesting their crops it was the custom

of the farmers in that district to move such derricks from

field to field and from farm to farm, through gateways, over

the public roads.”

Saylor, 110 Or at 233. The hay derrick in the case was 19

feet, six inches in height. Id. at 238-39. On the date of the

injury, the farmer was using “two spans of horses” to drive

the hay derrick to another farm. Id. at 233. From this usage,

this court concludes that an “implement” could include a

large and heavy machine. See also Gillard v. Gillard, 88 Or

95, 100, 171 P 557 (1918) (“[T]he only way of reaching the

summit [of the hill] is by a trail which cattle have made, the

path is sufficient to enable farming implements to be taken

to and from the hill.” (Emphasis added.)).

3. Conclusion regarding “farm implement”

The text and context of “farm implement” indicate

that the same facts will control as to that term as in the

analysis of whether the Compressor System is “movable” or

29

See Arndt v. Arndt, 146 Or 347, 352-53, 30 P2d 1 (1934) (listing property

in a divorce case: “six cows and two heifers,” a tractor, and “other farming imple-

ments of small value”) (emphasis added).

438 Farmer’s Direct, Inc. v. Dept. of Rev.

“affixed to the land.” In any event, even if the Compression

System is a “farm implement,” under Saunders, the exemp-

tion under ORS 307.394 is available only if the Compression

System is also “moved or movable in the ordinary course of

business” or “designed to be moved in the ordinary course

of business.” Accordingly, the court does not anticipate a

need to decide separately under ORS 307.020(1)(c) whether

the term “movable” impliedly modifies “farm implement” in

addition to “machinery,” “tools,” and “equipment.” The court

will deny summary judgment as to this issue as well.

C. Taxpayer’s remaining arguments

Taxpayer makes an additional alternative argu-

ment: The Compression System can be classified as per-

sonal property because, under ORS 308.875, manufactured

structures and mobile homes—which “are built to be occu-

pied and are typically connected to water, sewer, electricity

and other utilities through wires and plumbing”—are clas-

sified as personal property.30 The court rejects this argu-

ment: The legislature explicitly granted personal property

treatment for manufactured structures under certain condi-

tions. Taxpayer never asserts that the Compression System

is a manufactured structure and does not point to a statute

similar to ORS 308.875 declaring that property such as the

Compression System is personal property.

VII. CONCLUSION

The stipulated facts and exhibits do not allow the

court to determine whether the Compression System is

“tangible personal property” or “designed to be moved in

the ordinary course of business” based on the legal analysis

above. Now, therefore,

IT IS ORDERED that Defendant’s Motion for

Summary Judgment is denied.

30

Taxpayer also cites one of the department’s forms, Form No. 150-303-

658, which, according to taxpayer, “provides that ‘all manufactured structures

are personal property.’ ” The court is not bound by the department’s forms and,

regardless, nothing in Form No. 150-303-658 is inconsistent with the depart-

ment’s argument in this case.