Ellison v. Dept. of Rev.

148 November 9, 2017 No. 60

IN THE SUPREME COURT OF THE

STATE OF OREGON

Barbara ELLISON,

Plaintiff-Respondent,

v.

DEPARTMENT OF REVENUE,

State of Oregon,

Defendant-Appellant,

and

CLACKAMAS COUNTY ASSESSOR,

Defendant.

(TC 5177; SC S064092)

On appeal from a supplemental money judgment of the

Oregon Tax Court.

Henry C. Breithaupt, Judge.

Argued and submitted June 14, 2017.

Denise G. Fjordbeck, Assistant Attorney General, Salem,

argued the cause and filed the brief for appellant Department

of Revenue. Also on the brief were Ellen F. Rosenblum,

Attorney General, Benjamin Gutman, Solicitor General, and

Daniel Paul, Assistant Attorney General.

Jack L. Orchard, Ball Janik, LLP, Portland, argued the

cause for respondent Barbara Ellison. Bruce H. Cahn and

Jack L. Orchard filed the brief.

Before Balmer, Chief Justice, and Kistler, Walters, Landau,

Nakamoto, and Flynn, Justices, and Brewer, Senior Justice

pro tempore.*

BREWER, S. J.

The supplemental money judgment of the Tax Court is

vacated. The matter is remanded to the Tax Court for fur-

ther proceedings.

______________

*  Duncan, J., did not participate in the consideration or decision of this case.

Cite as 362 Or 148 (2017) 149

Case Summary: In an underlying property tax appeal, the Tax Court rejected

a request by the Department of Revenue (department) and the county assessor

to increase the real market value of taxpayer’s property, and the court later

awarded taxpayer attorney fees against the department under ORS 305.490(4)

(a) (authorizing discretionary award of attorney fees in ad valorem taxation cases

if “the court finds in favor of the taxpayer”). The department appealed the attor-

ney fee award only. Held: (1) In ORS 305.490(4)(a), the words “in favor of the

taxpayer” include the situation in which both parties request a change in valua-

tion on appeal, and the taxpayer persuades the court to reject the department’s

request for an increase, even though the taxpayer was unsuccessful in her own

request for a reduction in value; (2) the court here found “in favor of the taxpayer”

and had discretion to award attorney fees under ORS 305.490(4)(a); and (3) in

reviewing the Tax Court’s exercise of that discretion, one of the factors was not

supported by substantial evidence in the record.

The supplemental money judgment of the Tax Court is vacated. The matter is

remanded to the Tax Court for further proceedings.

150 Ellison v. Dept. of Rev.

BREWER, S. J.

In the underlying property tax appeal, the Tax Court

rejected a request by the Department of Revenue (depart-

ment) and the county assessor to increase the real market

value of taxpayer’s property, and the court later awarded

taxpayer attorney fees against the department under ORS

305.490(4)(a) (authorizing discretionary award of attorney

fees in ad valorem taxation cases if “the court finds in favor

of the taxpayer”). The department appeals the attorney fee

award only. As we will explain, even though the Tax Court

also rejected the taxpayer’s request for a reduction in real

market value, we conclude that the legal prerequisite for a

discretionary attorney fee award under that statute—that

the court found “in favor of the taxpayer”—was met. We also

conclude that the Tax Court did not err in applying most

of the factors on which it relied in making the fee award.

However, we conclude that the court’s use of one factor was

erroneous, thus bringing into question the court’s overall

exercise of discretion. Accordingly, we vacate the attorney

fee award and remand for the court to exercise its discretion

without considering that factor.

I. OVERVIEW

A.  The Underlying Appeal

Even though this case involves only the propriety

of a discretionary award of attorney fees, the Tax Court’s

decision on the merits in the underlying property tax appeal

provides the necessary context for our analysis. At issue in

that appeal was the real market value for tax year 2011-12

of two tax lots (the property) owned by taxpayer. The tax lots

are part of a high-end horse breeding and training facility

and an associated residence. Taxpayer substantially com-

pleted construction before January of 2011, and thus the

value for that year would establish an exception value for

the property.1

The county assessor originally found a real mar-

ket value for the two tax lots, both land and improvements,

1

As discussed in greater detail below, an exception value permissibly exceeds

otherwise applicable constitutional limits on the amount by which property val-

ues can periodically increase for tax purposes.

Cite as 362 Or 148 (2017) 151

of $9,279,571. Taxpayer appealed that value to the county

Board of Property Tax Appeals (BOPTA). BOPTA affirmed

without changing that value.

Taxpayer next appealed to the Magistrate Division

of the Oregon Tax Court. Before the magistrate, the depart-

ment and assessor asserted a real market value of $18,275,412.

Taxpayer, by contrast, appears to have asserted a much lower

real market value than that affirmed by BOPTA (although

the exact amount does not appear in the record). The magis-

trate accepted neither value, nor was she able to determine

the correct real market value from the appraisals provided.

She therefore affirmed BOPTA’s determination of real mar-

ket value.

Taxpayer then appealed to the Regular Division of

the Tax Court. Her complaint asserted a real market value

of less than $4.8 million,2 though by the time of trial she had

revised that upward to $8.8 million. In contrast, in their

answer to taxpayer’s complaint in the Regular Division, the

department and county assessor asserted a value of almost

$20 million, which was slightly higher even than the amount

they had originally asserted before the magistrate.3

At trial, the parties offered appraisals to support

their respective valuations. Both appraisers agreed that the

cost approach was the best way to determine real market

value. Their primary disagreement concerned the ques-

tion of external obsolescence and its effect, if any, on the

value of the property. In asserting a lower value, taxpayer’s

appraiser, Gilmore, concluded that there was significant

external obsolescence. In support of the department’s proposed

2

That was the value asserted for the two tax lots at issue here, plus six other

tax lots. Taxpayer would later agree that only two lots were at issue in the appeal.

3

The department asserted that value in its answer, but it did not separately

plead a counterclaim. In its decision on the merits, the Tax Court acknowledged

its prior holding that counterclaims have no “statutory validity” in the Tax Court,

but nevertheless concluded that ORS 305.412 permits a party to request a value

“above or below that determined in prior proceedings.” Ellison v. Clackamas

County Assessor, 22 OTR 201, 202 n 1 (2015). The parties do not dispute the Tax

Court’s understanding of ORS 305.412. Nor do they challenge that court’s prior

decision addressing counterclaims. See Village at Main Street Phase II, LLC II v.

Dept. of Rev., 360 Or 738, 745 n 4, 387 P3d 374 (2016) (noting Tax Court’s hold-

ing regarding counterclaims, but without determining correctness of holding).

Regardless, the county assessor did plead a counterclaim for the higher value.

152 Ellison v. Dept. of Rev.

higher value, its appraiser, Healy, asserted that there was

no external obsolescence at all.4 Before turning to a more

detailed review of the two appraisals, it is useful to provide

an overview of several property valuation principles that

were factors in the underlying appeal.

B.  Valuation Principles

The starting point for calculating property taxes

is the property’s real market value. Dept. of Rev. v. River’s

Edge Investments, LLC, 359 Or 822, 825, 377 P3d 540

(2016). For that purpose, “real market value” is defined in

essence to be what a buyer would pay a seller in an arm’s

length transaction on the assessment date. Or Const, Art

XI, § 11(11)(a)(A); 5 ORS 308.205(1).6 To determine the real

market value of property, appraisers use three approaches:

the cost approach, the income approach, and the comparable

sales approach. OAR 150-308.205-(A)(2)(a). The approaches

are named for the types of indicators that the appraiser

uses to estimate the value that a purchaser in the market

would pay for the property. The cost approach considers “the

cost of constructing a substitute property that provides the

same utility as the subject property at its highest and best

use”; the income approach relies on the income stream that

the property generates; and the comparable sales approach

examines the prices that buyers have paid for similar prop-

erties. See Hewlett-Packard Co. v. Benton County Assessor,

357 Or 598, 603, 356 P3d 70 (2015). Appraisers must con-

sider each approach, but they need not use them all. See,

e.g., River’s Edge, 359 Or at 827. An appraiser may well con-

clude that one of the three approaches represents the best

4

Strictly speaking, the county assessor was the party who offered Healy’s

testimony. At trial, however, the department effectively adopted Healy’s testi-

mony, declining to offer its own appraisal. To avoid unnecessarily confusing ter-

minology, we will sometimes refer to Healy as “the department’s appraiser.”

5

That subsection of the constitution provides:

“The real market value of property shall be the amount in cash that could

reasonably be expected to be paid by an informed buyer to an informed seller,

each acting without compulsion in an arm’s length transaction occurring as

of the assessment date for the tax year, as established by law.”

6

Unless otherwise noted, all references to the pertinent statutes and admin-

istrative rules are to the versions in effect on January 1, 2011, the assessment

date for the 2011-12 tax year. See ORS 308.007 (defining “assessment date” and

explaining relation to “tax year”).

Cite as 362 Or 148 (2017) 153

approximation for the real market value. Appraisal Institute,

The Appraisal of Real Estate 600 (12th ed 2001) (appraiser

weighs approaches “and relies most heavily on the approach

that is most appropriate to the nature of the appraisal prob-

lem”); see, e.g., Brooks Resources Corp. v. Dept. of Revenue,

286 Or 499, 505-07, 595 P2d 1358 (1979) (on facts of that

case, court concluded that income approach provided better

measure of value than cost approach).

Another type of property value is use value (also

known as “value in use”). Use value essentially looks to the

economic value that the property has to its current owner,

without regard to what price the property might draw in the

market. Appraisal of Real Estate at 24-25; STC Submarine,

Inc. v. Dept of Rev., 320 Or 589, 595-96, 890 P2d 1370 (1995)

(to same effect). Use value often differs from market value,

and it can be significantly higher than market value:

“ ‘For example, a property may be designed to produce a

special product, the patent for which is held only by the

owner of the property. Such a property would have little

value to any other person but could be of great value to the

owner of the patent.’ ”

STC Submarine, 320 Or at 596 (quoting Truitt Brothers, Inc.

v. Dept. of Rev., 10 OTR 111, 114 (1985)).

In some cases, a property has no immediate market

value. In that circumstance, the “real market value” is the

amount that would justly compensate the owner if the prop-

erty were lost. ORS 308.205(2)(c).7 Although this court does

not appear to have directly addressed the issue, the Tax

Court has held that the just compensation standard in ORS

308.205(2)(c) is not use value; it is still market value. Truitt

Brothers, Inc. v. Dept. of Rev., 10 OTR 111, 113-15 (1985), aff’d

on other grounds, 302 Or 603, 732 P2d 497 (1987) (discussing

7

That statute provides:

“(2)  Real market value in all cases shall be determined by methods and

procedures in accordance with rules adopted by the Department of Revenue

and in accordance with the following:

“* * * * *

“(c)  If the property has no immediate market value, its real market value

is the amount of money that would justly compensate the owner for loss of the

property.”

154 Ellison v. Dept. of Rev.

concepts and explaining its conclusion). The department’s

rule implementing ORS 308.205(2)(c), the “especial prop-

erty” rule, comports with that understanding. It states that,

if comparable sales are not available for a property, then

“real market value” will be determined using only the cost

approach and/or the income approach. OAR 150-308.205-

(A)(3).8 In their briefing to the Tax Court, the department

and county assessor both adopted that understanding of the

statute and rule.

In this case, both parties used the cost approach.

In doing so, the major difference between the appraisers’

opinions was whether and to what extent the property had

external obsolescence (sometimes also called economic obso-

lescence). External obsolescence is

“a loss in value caused by factors outside a property. It is

often incurable. External obsolescence can be either tem-

porary (e.g., an oversupplied market) or permanent (e.g.,

proximity to an environmental disaster).”

Appraisal of Real Estate at 412; see J.R. Simplot Co. v. Dept.

of Rev., 321 Or 253, 260, 897 P2d 316 (1995) (same). Because

of its amorphous quality, external obsolescence has been

called a “ ‘ghostly apparition,’ ” a “ ‘spirit whose presence may

be discerned but whose intangible nature defies measure-

ment’ ”; “ ‘it confuses and chills the marketplace.’ ” Truitt

Brothers, Inc. v. Dept. of Rev., 302 Or 603, 611, 732 P2d 497

(1987) (quoting Truitt Brothers, 10 OTR at 118).

One final legal concept is relevant to the issues

here. The Oregon Constitution creates a limit on the value

at which real property may be assessed. Or Const, Art XI,

§ 11; see Gall v. Dept. of Rev., 343 Or 293, 295, 170 P3d 558

8

Specifically, that rule states:

“(3)  Valuation of Especial Property: Especial property is property spe-

cially designed, equipped, and used for a specific operation or use that is

beneficial to only one particular user. This may occur because the especial

property is part of a larger total operation or because of the specific nature of

the operation or use. In either case, the improvement’s usefulness is designed

without concern for marketability. Because a general market for the prop-

erty does not exist, the property has no apparent immediate market value.

Real market value must be determined by estimating just compensation for

loss to the owner of the unit of property through either the cost or income

approaches, whichever is applicable, or a combination of both.”

Cite as 362 Or 148 (2017) 155

(2007) (explaining). That limit is known as the maximum

assessed value. Or Const, Art XI, § 11(1)(a); Gall, 343 Or at

295. Ordinarily, a property’s maximum assessed value can

only increase by three percent per year. Or Const, Art XI,

§ 11(1)(b); ORS 308.146(1). In specified exceptional circum-

stances, however, the maximum assessed value is calculated

differently, and it can increase by more than three percent

in a particular year. See Or Const, Art XI, § 11(1)(c); ORS

308.146(3) (listing circumstances). When such an exception

applies, the result is sometimes colloquially called the

exception value. See Douglas County Assessor v. Crawford,

21 OTR 6, 7 (2012) (discussing term). One situation in which

there is an exception value is for new improvements to prop-

erty. Or Const, Art XI, § 11(1)(c)(A); ORS 308.146(3)(a). The

exception value becomes the new maximum assessed value

in future years and will otherwise be subject to the three

percent limit. See Or Const, Art XI, § 11(1)(d). For that rea-

son, the exception value has long-term implications for the

tax that may be assessed against the property.

With that preface, we turn to the parties’ appraisals.

C.  Appraisal Evidence

Taxpayer’s appraiser, Gilmore, had valued hundreds

of equine properties all over the nation. He concluded that

there was a market for the property, but it was a national

market. Based on a detailed analysis of sales of those prop-

erties, he testified that purchasers would not pay the cost

that the owner of this property had incurred in adding the

various improvements. Thus, while Gilmore used the cost

approach, he concluded that the property suffered substan-

tial external obsolescence of 50 percent. That led to his ulti-

mate value for the property of $8,800,000.

Healy—the department’s appraiser—had no expe-

rience with valuing agricultural business properties gener-

ally (except a few hobby farms), or with equine properties, or

with valuing especial properties; his experience was largely

limited to residential properties. In searching for compara-

ble sales, Healy referred to fewer sources than Gilmore, and

his sources were more general than Gilmore’s. Healy’s analy-

sis of the few sales that he did locate was limited to deter-

mining whether the property as a whole was comparable to

156 Ellison v. Dept. of Rev.

taxpayer’s. Moreover, he did not break taxpayer’s property

down into component parts to determine if external obsoles-

cence applied to such individual improvements as fencing or

the horse arena.

Based in part on a decision to limit the market to

properties in Oregon, Healy concluded that the subject prop-

erty had no immediate market value: in his view, it was an

especial property under OAR 150-308.205(A)(3), and there-

fore it was subject to the just compensation standard of ORS

308.205(2)(c). Healy’s testimony showed that he believed

that the just compensation standard is different from real

market value and more akin to use value.9 Later, however,

Healy testified that his value did not depend on whether the

property was, in fact, especial.

Because Healy had found no market data within

the market as he defined it, he concluded that there was no

external obsolescence at all. Accordingly, Healy opined that

the just compensation value of the property would be the full

cost that taxpayer had spent improving it, without deduct-

ing anything for depreciation or external obsolescence. His

final value was $19,815,225.

D.  The Tax Court’s Decision On The Merits

The Tax Court ultimately rejected both appraisals,

explaining in a written opinion that it found that neither

one met the relevant burden of proof. Ellison v. Clackamas

9

The relevant exchange was as follows:

“THE COURT:  * * * [U]nder your understanding of this statute and rule,

do you think that the amount to justly compensate the owner for the loss of

property is any different from the real market value of the property? * * *

“* * * * *

“Just from your point of view as an appraiser, would you—when you look

at all of this, do you—would you think that there could be a just compensation

to the owner that is greater than the real market value?

“THE WITNESS:  Well, the ‘real market value’ being defined as some-

thing derived from market sales? Because if—

“THE COURT:  No. The real market value being defined as the amount

that a willing buyer would pay a willing seller, neither acting under

compulsion.

“THE WITNESS:  Then, yes, quite possibly, there could be a big differ-

ence, but—

“THE COURT:  Okay. Thank you.”

Cite as 362 Or 148 (2017) 157

County Assessor, 22 OTR 201 (2015). In so holding, how-

ever, the Tax Court gave some credit to Gilmore’s testimony

because (1) he was experienced in appraising farm proper-

ties in general and horse properties in particular; (2) he had

correctly concluded that the relevant market was national,

not local; and (3) he had correctly opined that there should

be some substantial deductions for economic obsolescence.

22 OTR at 205. The Tax Court rejected taxpayer’s appraisal,

however, primarily because the court was not persuaded by

Gilmore’s opinion as to the amount of obsolescence. The court

also critiqued some of Gilmore’s other steps in the appraisal

process. Id. at 204-05.

The court more sharply rejected the department’s

appraisal. In doing so, the court raised broad questions

about Healy’s methodology.10 Accordingly, the court stated,

it “place[d] no reliance upon the conclusions” of Healy. Id.

Unpersuaded by either party’s appraisal, the court then

considered whether it could independently determine the

true value of the property under ORS 305.412. It concluded

that it could not do so. Accordingly, the court affirmed the

BOPTA value. 22 OTR at 206.

E.  Attorney Fee Award

In the wake of the tax court’s decision, taxpayer

sought an award of attorney fees under ORS 305.490(4)(a).

As noted, that statute gives the Tax Court discretion to

award attorney fees and expert witness fees incurred before

a magistrate and in the Regular Division if the court “finds

in favor of the taxpayer.”11 If that legal prerequisite is met,

10

In particular, the court noted that Healy “lacked any experience” with

appraising this type of property. 22 OTR at 206. He made only limited inquiry

into the state of the market, based on his “unsupported” view that he should only

consider the local market. Id. “Throughout his report and testimony, [Healy] * * *

repeatedly indicated a profound inability to distinguish between value in use and

market value.” Id. He also “ignore[d] taxpayer’s persuasive evidence” of substan-

tial external obsolescence. Id.

11

ORS 305.490 provides, in part:

“(4)(a) If, in any proceeding before the tax court judge involving ad

valorem property taxation, exemptions, special assessments or omitted prop-

erty, the court finds in favor of the taxpayer, the court may allow the tax-

payer, in addition to costs and disbursements, the following:

“(A)  Reasonable attorney fees for the proceeding under this subsection

and for the prior proceeding in the matter, if any, before the magistrate; and

158 Ellison v. Dept. of Rev.

in exercising its discretion whether to award fees, the Tax

Court must consider the factors set out in ORS 20.075(1).12

If the court decides to make a discretionary award, then the

court must consider the same factors, plus the additional

factors found in subsection (2) of that statute, to determine

the amount of the award. Taxpayer sought approximately

$122,000 in attorney fees incurred litigating the case, plus

$44,000 in expert witness fees.13

The department objected. Among other arguments,

it asserted that ORS 305.490(4)(a) did not permit a fee

award, because the Tax Court had not found “in favor of the

taxpayer.”

The Tax Court awarded the full amount of fees

requested by taxpayer. The court initially held that its deci-

sion on the merits satisfied the legal prerequisite of being “in

favor of the taxpayer” under ORS 305.490(4)(a). Although the

court had ultimately rejected both appraisals and affirmed

the BOPTA value, the court concluded that its rejection of

the department’s appraisal seeking a higher value higher

amounted to a finding “in favor of the taxpayer.”

The Tax Court then concluded that it should exer-

cise its discretion to award attorney fees. The court initially

concluded that the department’s valuation was not objec-

tively reasonable. The court reiterated that the depart-

ment’s theory was based on a “fundamental” error of using

“value in use” rather than market value. Although Healy

had attempted to rely on the especial property definition,

the court concluded that he “could not explain or justify”

that reliance.

The court also concluded that the department

persistently had pursued its aggressive and unreasonable

“(B)  Reasonable expenses as determined by the court. Expenses include

fees of experts incurred by the individual taxpayer in preparing for and con-

ducting the proceeding before the tax court judge and the prior proceeding in

the matter, if any, before the magistrate.”

12

The text of that statute is set out below.

13

That amount was based on taxpayer’s estimate that 75 percent of her

attorney’s time was spent on defending against the department and county asses-

sor’s request for an increase in valuation of the property, rather than on her own

request for a reduction in valuation.

Cite as 362 Or 148 (2017) 159

valuation by repeatedly seeking a valuation of more than

twice what BOPTA had found. Moreover, the court noted,

in light of the constitutional requirements for determining

maximum assessed value, the determination here would

have affected taxpayer’s property taxes for years to come, if

not perpetually.

The court added that the department’s aggressive

and unreasonable valuation had made it necessary for tax-

payer to appeal to the Regular Division in the first place—

“to protect against” the department’s position “that the

property had been grossly undervalued by BOPTA.” In the

court’s view, the department’s valuation also likely had made

settlement impossible. Finally, the court concluded that an

award of fees was needed to deter “the type of claims made

by [the department and county] and then so inadequately

supported.”

II. ANALYSIS

As noted, we ultimately review the Tax Court’s deci-

sion to award fees for abuse of discretion. ORS 20.075(3).

However, such an exercise of discretion can involve predi-

cate factual and legal determinations. See Oakmont, LLC

v. Dept. of Rev., 359 Or 779, 789, 377 P3d 523 (2016). For

predicate legal questions, we review for errors of law. ORS

305.445. For predicate factual issues, we review for “lack

of substantial evidence in the record to support the tax

court’s decision or order.” Id. Because this appeal requires

us to consider whether the Tax Court’s underlying valuation

decision supported the award of fees, and because neither

party has challenged the merits of that decision, we assume

for present purposes that the Tax Court’s decision correctly

resolved the underlying legal and factual issues regarding

the valuation.

A.  The Tax Court Ruled “in Favor of the Taxpayer” Under

ORS 305.490(4)(a)

We begin with the legal question whether the Tax

Court had authority to make an attorney fee award under

ORS 305.490(4)(a), which, as noted, permits an award if the

Tax Court has found “in favor of the taxpayer.” The depart-

ment asserts that the Tax Court’s decision on the merits did

160 Ellison v. Dept. of Rev.

not meet that criterion, an argument that (if accepted) would

be dispositive. Accordingly, we address that issue first.

In construing ORS 305.490(4)(a), we consider its

text in context, giving any pertinent legislative history such

weight as is appropriate. See State v. Gaines, 346 Or 160,

171-72, 206 P3d 1042 (2009). Again, that statute provides,

in part:

“If, in any proceeding before the tax court judge involv-

ing ad valorem property taxation, exemptions, special

assessments or omitted property, the court finds in favor of

the taxpayer, the court may allow the taxpayer, in addition

to costs and disbursements, the following:

“(A)  Reasonable attorney fees for the proceeding under

this subsection and for the prior proceeding in the matter,

if any, before the magistrate; and

“(B)  Reasonable expenses as determined by the court.

Expenses include fees of experts incurred by the individual

taxpayer in preparing for and conducting the proceeding

before the tax court judge and the prior proceeding in the

matter, if any, before the magistrate.”

The department argues that “ORS 305.490(4) does

not authorize an award of attorney fees and costs when a

taxpayer appeals to the Tax Court but obtains no reduc-

tion in tax assessment.” For the reasons explained below,

we reject that argument in the circumstances present here,

where both parties on appeal requested a change in tax

assessment, and the Tax Court rejected both requests.

Beginning with the text of the statute, we note that

the meaning of the phrase “in favor of the taxpayer” is not

self-evident. The phrase implies that the court must make

a relative determination, in which it determines favorabil-

ity by comparing the court’s decision on the merits to some

standard. The statutory text alone, however, does not explic-

itly identify that standard. One plausible textual reading

would determine favorability by comparing the Tax Court’s

decision to the taxpayer’s request for affirmative relief on

appeal. That reading is narrow; under it, a finding would

be in favor of the taxpayer only if the taxpayer sought and

obtained at least some affirmative relief from the decision

of the lower tribunal. That is the interpretation advanced

Cite as 362 Or 148 (2017) 161

by the department. That narrow definition is not met here:

Taxpayer did not succeed in having the BOPTA value

reduced on appeal.

Another plausible reading, however, understands

“in favor of” more broadly. That reading is not limited to the

situation in which a taxpayer succeeds in obtaining affirma-

tive relief on appeal (i.e., the taxpayer persuades the court

to reduce the BOPTA value). Instead, the broader reading

also could include the situation where both parties request

a change in valuation on appeal, and—even though unsuc-

cessful in her own request for a reduction in value—the tax-

payer persuades the court to reject the department’s request

for an increase. In that situation, the court’s rejection of the

department’s request for a valuation increase would consti-

tute a finding in favor of the taxpayer with respect to that

request. That reading reflects taxpayer’s position here.

With those competing views in mind, several related

principles inform our analysis. First, the Tax Court reviews

the valuation decisions of lower tribunals de novo. See ORS

305.425(1) (“All proceedings before the judge of the tax court

shall be original, independent proceedings and shall be tried

without a jury and de novo.”). Thus, the proper benchmark

for comparison of the outcome before the Tax Court in this

case was the BOPTA valuation decision, and the court owed

no deference to that valuation decision.

Second, when a party appeals the real market value

of one or more of the components of a property tax account,

any other party to the appeal also may challenge that value.

Under ORS 305.287 (2011):

“Whenever a party appeals the real market value of one

or more components of a property tax account, any other

party to the appeal may seek a determination from the

body or tribunal of the total real market value of the prop-

erty tax account, the real market value of any or all of the

other components of the account, or both.”14

14

Although that statute was adopted after January 1, 2011, it was in effect

and applied to taxpayer’s appeals to the Magistrate Division and Regular

Division. See Village at Main Street Phase II v. Dept. of Rev., 356 Or 164,

170, 182-85, 339 P3d 428 (2014) (holding that that statute applied to appeals

filed in either Magistrate or Regular Divisions after statute’s effective date,

September 29, 2011).

162 Ellison v. Dept. of Rev.

That statute thus permitted the department to affirma-

tively request an increase in the total real market value of

taxpayer’s property when taxpayer appealed BOPTA’s valu-

ation decision.

Third, the Tax Court also had authority “to deter-

mine the real market value or correct valuation on the basis

of the evidence before the court, without regard to the val-

ues pleaded by the parties.” ORS 305.412. However, to avoid

unfair surprise, the Tax Court’s own case law required

it to exercise its authority under ORS 305.412 within the

range of values set out in the parties’ pleadings. See Chart

Development Corp. v. Dept. of Rev., 16 OTR 9, 14-15 (2001)

(to avoid unfair surprise and interference with department’s

ability to perform statutorily mandated supervisory func-

tion, Tax Court limits party to relief sought in pleadings);

see also Wilsonville Heights Assoc., Ltd. v. Dept. of Rev., 339

Or 462, 467 n 5, 122 P3d 499 (2005) (noting that holding).

In short, the parties’ opposing requests for relief from the

BOPTA decision effectively set outside valuation limits for

the Tax Court’s decision on appeal.

With that understanding, we examine the text in

context of ORS 305.490(4)(a). Although the meaning of the

phrase “in favor of the taxpayer” may be uncertain based on

its text alone, we conclude that, in context, it has a readily

understood meaning as a term of legal art that is more con-

sistent with the broader interpretation for which taxpayer

advocates. Throughout the law relating to civil actions, stat-

utes,15 court rules,16 and court opinions17 regularly describe

15

E.g., ORS 18.810(2) (when creditor has garnished funds by provisional

process, money will be paid back to debtor if “judgment is entered in favor of the

debtor”); ORS 105.137(2) (in certain FED actions, if the defendant appears at

the first appearance and the plaintiff does not, then “a default judgment shall be

entered in favor of the defendant dismissing the plaintiff’s complaint”).

16

E.g., ORCP 21 A (“If the court grants a motion to dismiss, the court may

enter judgment in favor of the moving party”; a court granting a party’s motion

to dismiss is not awarding that party affirmative relief); ORCP 47 B (“A party

against whom a claim, counterclaim, or cross-claim is asserted * * * may, at any

time, move * * * for a summary judgment in that party’s favor[.]”); ORCP 61 A(1)

(“A general verdict is that by which the jury pronounces generally upon all or any

of the issues either in favor of the plaintiff or defendant.”).

17

E.g., Dowell v. Oregon Mutual Ins. Co., 361 Or 62, 65, 388 P3d 1050 (2017)

(“After a hearing, the trial court granted defendant’s motion [for summary judg-

ment] and entered a judgment in defendant’s favor.”); Wels v. Hippe, 360 Or 807,

Cite as 362 Or 148 (2017) 163

a judgment as being “in favor of” a party who successfully

resists an opposing party’s request for relief, without regard

to whether the party herself obtained affirmative relief.

The department counters that the sole “claim” in

a property tax appeal is “a request to determine the actual

value of the property.” According to the department, the Tax

Court therefore can be deemed to have found in favor of a

taxpayer only if it determines that the value of the property,

as found by BOPTA, is too high. In support of that argu-

ment, the department relies on Kaib’s Roving R.Ph. Agency

v. Employment Dept., 338 Or 433, 111 P3d 739 (2005), where,

it asserts, this court interpreted the phrase “in favor of” in

another attorney fee statute, ORS 183.497(1)(a), to require

that a decision be “ ‘of present benefit to [the] petitioner.’ ” We

disagree with both parts of the department’s argument.

First, the department’s suggestion that the sole

“claim” in a property tax appeal is “a request to determine

the actual value of the property” obscures the fact that both

parties made their own requests for affirmative relief from

the BOPTA valuation. As we already have explained, if the

department had not requested an increase in the BOPTA

value on appeal, the BOPTA value effectively would have set

the upper limit for the Tax Court’s decision. However, the

department’s own request for affirmative relief on appeal

expanded the upward limit for the Tax Court’s decision

above the BOPTA value and reset that limit to the higher

value pleaded by the department. Viewed accordingly, even

though the Tax Court made a single determination of value

on appeal, it did so in the context of resolving countervail-

ing requests for affirmative relief from the BOPTA decision

that, as pertinent here, effectively functioned as separate

claims by the parties.

Second, although the department relies on a defi-

nition that had been proposed to the court in Kaib’s Roving,

this court did not adopt that definition. In fact, to the extent

808, 388 P3d 1103 (2017) (“Defendants assert that this instruction requires the

trial court to vacate its original judgment in favor of plaintiff and enter judg-

ment in favor of defendants[.]”); Harkness v. Platten, 359 Or 715, 717, 375 P3d

521 (2016) (“This is a legal malpractice and negligent misrepresentation case

where we review a trial court judgment directing a verdict in favor of Platten

(defendant).”).

164 Ellison v. Dept. of Rev.

that the court addressed the correctness of that definition

at all, it seems to have questioned it. See id. at 442, 442 n 4

(questioning whether statutory words “in favor of” required

that “ ‘challenged order must be invalidated or altered in a

way that is of present benefit to the petitioning party’ ” as

asserted by department).

The department next argues that the legislative

history of ORS 305.490(4)(a) shows that (1) the legislature

equated “in favor of” with “prevailing party”; and (2) “pre-

vailing party” had a recognized meaning when that statute

was enacted, requiring that the party must have obtained

some affirmative relief.

The first part of that argument—that the legisla-

ture equated “in favor of” with “prevailing”—does find some

support in the legislative history.18 The statutory text at

issue was adopted in 2001 by Senate Bill 130. Or Laws 2001,

ch 287, § 1. The history of that bill several times describes

it as authorizing fees to a “prevailing taxpayer.” See Staff

Measure Summary, Senate Committee on Judiciary, SB

130, March 9, 2001; Staff Measure Summary, Senate

Committee on Revenue, SB 130, March 26, 2001; Staff

Measure Summary, House Committee on Judiciary, SB 130,

May 10, 2001.

The second part of the department’s argument,

however—that “prevailing party” is a term of art indicating

that a party must have received some affirmative relief—

fails. Oregon law prior to 2001 expressly recognized that

a “prevailing party” included a party who had success-

fully defended against another party’s claim. In Wilkes v.

18

However, we hasten to add that this court has previously refused to accept

similar legislative history suggesting that “in favor of” means “prevailing party.”

In Kaib’s Roving, the Employment Department had offered such legislative his-

tory. This court characterized that argument as “misplaced”:

“Clearly, the legislature knew how to refer to a ‘prevailing party’ when that

was what it intended. The fact that the legislature chose instead to refer in

ORS 183.497(1) to a finding ‘in favor of’ a party suggests that it intended

something different.”

338 Or at 443 (in part because the legislature had used the words “prevailing

party” elsewhere in the relevant chapter of the ORS). We need not consider

whether Kaib’s Roving is distinguishable or revisit its reasoning on that point. As

we explain in the text, even if we agreed that “in favor of” should be understood

to mean “prevailing party,” that would not aid the department’s position.

Cite as 362 Or 148 (2017) 165

Zurlinden, 328 Or 626, 984 P2d 261 (1999), this court inter-

preted ORS 20.096(5) (1999), which provided that the “pre-

vailing” party in an action on a contract is “the party in

whose favor final judgment is rendered.” The court left no

doubt that the party in whose “favor” judgment is rendered

includes a party who successfully defends against another

party’s request for affirmative relief:

“Because defendants defeated plaintiff’s claim, they

are the party in whose favor final judgment was rendered

on plaintiff’s claim. Similarly, because plaintiff defeated

defendants’ counterclaim, he is the party in whose favor

final judgment was rendered on defendants’ counterclaim.

Consequently, both are prevailing parties on the claims on

which they successfully defended.”

328 Or at 633-34 (emphases added). In short, even if we

agreed with the department that “in favor of” should be

understood to mean “prevailing party,” that would not sup-

port the department’s position that, for the court to have

found in her favor, taxpayer must have obtained a reduction

in value from the BOPTA decision. To the contrary, Wilkes

suggests that, when the legislature enacted ORS 305.490

(4)(a), it would have understood that a final judgment is (at

least in part) in favor of a party who defeats another party’s

request for affirmative relief.

The legislative history of ORS 305.490(4)(a) is con-

sistent with that understanding. The history shows that the

legislature intended the attorney fee provision for property

tax appeals to parallel an existing attorney fee award provi-

sion for income and inheritance tax appeals found in another

subsection of the same statute: ORS 305.490(3)(a) (1999).19

Then, as now, that provision authorizes attorney fee awards

19

See, e.g, Staff Measure Summary, Senate Committee on Judiciary, SB

130, March 9, 2001 (“Current law allows the tax court judge to award attorney

fees and costs to a prevailing taxpayer in income and inheritance tax appeals,”

but no similar provision exists for property tax appeals); Audio Recording,

Senate Committee on Judiciary, SB 130, March 7, 2001, at 6:20 (testimony of

Larry Tapanen, Tapanen Group, Inc.), http://records.sos.state.or.us/webdrawer/

webdrawer.dll/webdrawer/rec/4160427/ (accessed November 2, 2017) (noting that

bill would extend to property tax appeals existing law regarding attorney fee

awards in personal income tax); id. at 18:55 (statement of Mark Nelson, Oregon

Metals Industries Council) (noting that bill would “mirror[ ] that process” that

already exists for attorney fee awards in income tax appeals).

166 Ellison v. Dept. of Rev.

in income tax cases not only if the taxpayer obtained affir-

mative relief, but also if the department failed in its own

request for relief against the taxpayer. Specifically, that sub-

section authorizes a discretionary award of attorney fees if

the Tax Court:

“grants a refund claimed by the executor or taxpayer or

denies in part or wholly an additional assessment of taxes

claimed by the Department of Revenue to be due from the

estate or taxpayer[.]”

(Emphasis added.) In that respect, even though the legis-

lature did not use identical phrasing in subsections (3) and

(4)(a), the legislative history suggests that the legislature

did not intend to limit attorney fee awards to those circum-

stances in which a taxpayer obtained affirmative relief.

In sum, based on the text, context, and legislative

history of ORS 305.490(4)(a), we conclude that the legisla-

ture did not intend to restrict attorney fee awards in prop-

erty tax appeals to the circumstance in which a taxpayer

sought affirmative relief from the Tax Court and obtained

it. In addition, the court finds in favor of a taxpayer where

both parties request a change in valuation on appeal, and—

even though unsuccessful in her own request for a reduc-

tion in value—the taxpayer persuades the court to reject the

department’s request for an increase.20

With that understanding, we turn to the facts.

Before both divisions of the Tax Court, each party to

the underlying appeal requested affirmative relief from

the BOPTA valuation decision in their pleadings: In her

complaints, the taxpayer asked both divisions to reduce

the BOPTA value, while in its answers, the department

and county assessor asked both divisions to increase the

BOPTA value. By rejecting taxpayer’s request for affirma-

tive relief, both divisions of the Tax Court found in favor of

the department and county assessor on taxpayer’s request.

However, at the same time, by rejecting the department

and county assessor’s request for affirmative relief, both

20

Again, the department’s assertion that the sole “claim” in a property tax

appeal is “a request to determine the actual value of the property” overlooks the

fact that both parties made their own affirmative requests for relief from the

BOPTA valuation.

Cite as 362 Or 148 (2017) 167

divisions found in favor of the taxpayer on that request.

See Wilkes, 328 Or at 633-34 (where both parties success-

fully defended against other party’s claims, judgment was

in favor of both parties). Therefore, the Tax Court cor-

rectly concluded that the legal prerequisite under ORS

305.490(4)(a) for an award of attorney fees to taxpayer was

satisfied. Accordingly, we turn to the question whether the

Tax Court correctly exercised its discretion in awarding

attorney fees to taxpayer.

B.  The Tax Court Did Not Correctly Exercise its Discretion

in Awarding Attorney Fees

As noted, we ultimately review the Tax Court’s

decision to award attorney fees to taxpayer for an abuse

of discretion. ORS 305.490(4)(a); ORS 20.075(3). As fur-

ther noted, insofar as the court’s exercise of discretion

was predicated on its resolution of questions of law or fact,

those determinations implicate independent standards of

review. Oakmont LLC, 359 Or at 789 (noting importance,

in review of agency exercise of discretion, of distinguish-

ing factual findings from legal conclusions); see Barbara

Parmenter Living Trust v. Lemon, 345 Or 334, 342, 194

P3d 796, 801 (2008) (review of trial court’s exercise of dis-

cretion; distinguishing between factual findings and legal

conclusions).

When a statute provides for a discretionary award

of attorney fees, the legislature has directed courts to con-

sider the following factors in deciding whether to award fees:

“(a)  The conduct of the parties in the transactions or

occurrences that gave rise to the litigation, including any

conduct of a party that was reckless, willful, malicious, in

bad faith or illegal.

“(b)  The objective reasonableness of the claims and

defenses asserted by the parties.

“(c)  The extent to which an award of an attorney fee

in the case would deter others from asserting good faith

claims or defenses in similar cases.

“(d)  The extent to which an award of an attorney fee in

the case would deter others from asserting meritless claims

and defenses.

168 Ellison v. Dept. of Rev.

“(e)  The objective reasonableness of the parties and

the diligence of the parties and their attorneys during the

proceedings.

“(f)  The objective reasonableness of the parties and

the diligence of the parties in pursuing settlement of the

dispute.

“(g)  The amount that the court has awarded as a pre-

vailing party fee under ORS 20.190.

“(h)  Such other factors as the court may consider

appropriate under the circumstances of the case.”

ORS 20.075(1).

The Tax Court determined that several factors sup-

ported its decision to award attorney fees to taxpayer. As we

will explain, one of the factors on which the court relied—

its determination that the department’s persistent over-

valuation of the property valuation had made it necessary

for taxpayer to appeal—was not supported by evidence in

the record and, therefore, was incorrect. Thus, we remand to

the Tax Court for that court to exercise its discretion with-

out considering that erroneous factor. We nevertheless dis-

cuss other factors relied on by the court, so as to minimize

the need for a future appeal to this court.

First, the court concluded that the department’s

position regarding valuation was “objectively unreason-

able,” referring (presumably) to ORS 20.075(1)(b) (“objective

reasonableness of the claims and defenses”). The depart-

ment understands the Tax Court to have focused entirely

on Healy’s use of the “especial property” rule. Noting that

both appraisers used the cost approach, the department

asserts that the especial property rule was functionally

irrelevant to the proper resolution of any issue in the under-

lying appeal. The result here, it contends, would have been

the same whether the property was labeled as especial or

not.

We do not agree that the Tax Court placed such

narrow emphasis on the “especial property” rule; rather, it

offered a broader criticism of the department’s position. The

court explained:

Cite as 362 Or 148 (2017) 169

“The law in Oregon is that value is to be value in

exchange, not value in use or value to a particular tax-

payer. The position of the county departed completely from

this fundamental starting point. Attempting to use the

notion of especial property, which the appraiser for the

county could not explain or justify, that appraiser essen-

tially argued that the value of the property must be equal

to the amount taxpayer spent to build it. This position was

rejected in the opinion issued by this court.”

We find no error in that reasoning, either factually

or legally. As we have already explained, the department

has not challenged the premise that Oregon law requires the

use of market value, not “value in use”; in fact, the depart-

ment has endorsed that principle. Yet, there is evidence

in the record as a whole that the department’s appraiser

departed from that principle. As noted, Healy specifically

testified that he believed that just compensation value could

be higher than market value. That statement is inconsistent

with the department’s own position that just compensation

value is market value.

The Tax Court also did not err factually in stating

that Healy’s proposed value was essentially equal to the

amount that the owner had spent building it. Healy used the

cost approach without allowing for any depreciation or obso-

lescence. Nor did the Tax Court err factually in critiquing

Healy’s testimony about the especial property rule. Healy’s

testimony about especial property was confused, if not inter-

nally inconsistent. On the one hand, he asserted that the

property’s just compensation value—the value under the

especial property rule—could be greater than its market

value. On the other hand, he later asserted (at the end of a

long and somewhat confusing exchange) that his valuation

would be the same regardless of whether the property met

the definition of “especial property.”

In short, we conclude that the court did not err fac-

tually or legally. Factually, there was evidence in the record

to support the Tax Court’s determination that the depart-

ment’s appraisal incorrectly used “value in use” and that

Healy could not adequately explain or justify his use of the

“especial property” concept. Given Healy’s assertion that

just compensation value was different from market value—a

170 Ellison v. Dept. of Rev.

legal position that both the department and the county

assessor disavowed in briefing to the Tax Court—the Tax

Court did not err in concluding that the department’s posi-

tion was objectively unreasonable. See Mattiza v. Foster, 311

Or 1, 8 n 10, 803 P2d 723 (1990) (position is meritless “if it is

not supported by the law as applied to the facts” (emphasis

deleted)).

The department next asserts that the court misap-

plied the factor set out in ORS 20.075(1)(a), which directs a

court to consider

“[t]he conduct of the parties in the transactions or occur-

rences that gave rise to the litigation, including any con-

duct of a party that was reckless, willful, malicious, in bad

faith or illegal.”

After noting that the department had persisted in

pursuing an unreasonably high valuation throughout the

litigation, the Tax Court added: “Persistence may not be

bad faith or malicious, but it is willful.” The department

does not appear to challenge the factual content of that

statement—that the department willfully persisted in its

unreasonable valuation position. Instead, based on the com-

mon terminology—“willful,” “bad faith,” “malicious”—the

department asserts that the court erred as a legal matter

in concluding that those facts fell within the factor in ORS

20.075(1)(a). That factor, the department notes, applies only

to “the conduct of the parties in the transactions or occur-

rences that gave rise to the litigation,” not to conduct during

the litigation.

The department assumes that the Tax Court could

only have meant to refer to the factor identified in ORS

20.075(1)(a), then asserts that ORS 20.075(1)(a) does not go

so far, and then draws the conclusion that the Tax Court

therefore abused its discretion. If we were to accept the

department’s position, however, we would place form over

substance. A court is not limited to considering only prelit-

igation willfulness in deciding whether to award fees. The

court also may consider any “other factors as the court may

consider appropriate.” ORS 20.075(1)(h). We do not discern

any legal error in basing an award of attorney fees in part on

a party’s persistence in pursuing an objectively unreasonable

Cite as 362 Or 148 (2017) 171

position during the litigation. Nor was it legally erroneous

for the court to characterize such persistence as “willful,”

regardless of whether that term might have a more technical

definition in subsection (1)(a) (as the department suggests).

Accordingly, we reject the department’s contrary argument.

The department also asserts that the Tax Court

lacked a factual basis in the record to find that the depart-

ment’s position “more likely than not” hindered settlement.

See ORS 20.075(1)(f) (court may consider”[t]he objective

reasonableness of the parties * * * in pursuing settlement of

the dispute”). The department objects that there is no direct

evidence in the record regarding settlement discussions. We

do not believe that the Tax Court erred in drawing infer-

ences from the evidence that was in the record. By the time

of trial, taxpayer had proposed a value that was 95 percent

of the BOPTA valuation. The department’s proposed value,

however, was more than twice the BOPTA value. In her

petition for attorney fees, taxpayer offered evidence that the

department had not expressed any desire to settle the case.

In light of that evidence, the court did not err factually in

inferring that the department’s unreasonably high valua-

tion hindered settlement.

As noted, however, we nevertheless conclude that

the Tax Court’s exercise of discretion was based in part on

an incorrect factor. Specifically, the court’s order awarding

attorney fees stated:

“The court accepts the argument of taxpayer that an appeal

of the decision in the Magistrate Division was necessary to

protect against what appeared to be, and turned out to be,

a persistent position of the county that the property had

been grossly undervalued by BOPTA.”

Later, the court reiterated the same point, albeit more

ambiguously:

“[T]he persistence with which the [valuation] position was

advanced left taxpayer with no alternative but to expend

significant amounts to defend against the position taken by

[the department and the county] in the case.”

The court appears to have been referring to the

following assertion contained in an affidavit submitted by

taxpayer:

172 Ellison v. Dept. of Rev.

“The [taxpayer’s] proceedings at the Regular Division were

made necessary by the Assessor’s insistence on a higher

[real market value] and my belief (now confirmed by the

Court) that Mr. Healy’s appraisal methodology was incor-

rect, leaving the Assessor with no demonstrated rationale

for the property’s [real market value].”

We cannot agree that substantial evidence in the

record supports the factual finding that the department’s

persistent over-valuation of the property made taxpay-

er’s appeal to either division of the Tax Court necessary.21

Taxpayer, not the department, appealed the BOPTA order

to the Magistrate Division and then appealed the mag-

istrate’s affirmance of the BOPTA order to the Regular

Division of the Tax Court. By appealing those decisions,

taxpayer opened the door for precisely what the department

ultimately did: present its higher value appraisal to another

tribunal. See ORS 305.412 (once real market value of prop-

erty is at issue, Tax Court has authority “to determine the

real market value * * * on the basis of the evidence before the

court, without regard to the values pleaded by the parties”);

ORS 305.287 (2011) (“Whenever a party appeals the real

market value of one or more components of a property tax

account, any other party to the appeal may seek a deter-

mination from the body or tribunal of the total real market

value of the property tax account * * *.”).

In short, substantial evidence is lacking in the

record to support a finding that it was necessary for taxpayer

to appeal (either to the Magistrate Division or the Regular

Division) in anticipation of a possible last-minute appeal by

the department or county. The statutes just mentioned, ORS

305.412 and ORS 305.287 (2011), would have allowed tax-

payer to seek a lower valuation during any appeal by the

department or the county, precisely as taxpayer’s appeals

did not preclude the department and county from seeking a

higher valuation. See ORS 305.412 (statutory text addresses

court’s ability to consider evidence before it and does not cre-

ate or refer to any pleading requirement); Ellison, 22 OTR at

21

It is not entirely clear from the court’s comments whether it meant to focus

exclusively on taxpayer’s appeal to the Regular Division or whether it also deter-

mined that taxpayer’s appeal from BOPTA’s order to the Magistrate Division was

necessary. Accordingly, we address both issues.

Cite as 362 Or 148 (2017) 173

202 n 1 (ORS 305.412 permits a party to “request that the

court reach a proper value above or below that determined

in prior proceedings” (emphasis added)).

At oral argument, taxpayer appeared to offer a dif-

ferent legal rationale for the Tax Court’s determination by

suggesting that the department might somehow try to col-

laterally attack the magistrate’s ruling in future tax years

based on its aggressive and erroneous theories about the

value of the property. Taxpayer implied that an appeal to

the Regular Division therefore was necessary to put an end

to that effort. However, taxpayer has not explained how—

assuming that there had been no appeal to the Regular

Division—the department in ensuing tax years could have

collaterally challenged the final valuation decision by the

magistrate for the tax year at issue. To the contrary, as

taxpayer herself acknowledged, it was the value finally

accepted by the court—not the value proposed in a rejected

appraisal—that would establish a baseline for the valuation

of the property in future years.22

In sum, we find neither legal support nor substantial

evidence in the record for the Tax Court’s determination that

the department’s persistent over-valuation made taxpayer’s

appeals necessary. Taxpayer’s complaint in the Regular

Division offers a more plausible reason for the appeal. That

complaint asserted that the BOPTA value adopted by the

magistrate should be reduced by almost half—a reduction in

value of more than $4 million. Although it is not clear from

the record what valuation taxpayer sought in the Magistrate

Division, taxpayer appears to admit that she sought an even

lower value from BOPTA: $1,787,320. In considering why

taxpayer filed her appeals, then, her initial quest to obtain

a major reduction in value (and thus her property tax) pro-

vided a more plausible incentive than speculative anticipa-

tion of possible appeals by the department and the county.

22

The Tax Court stated in its order:

“In this case exception value was at issue. The outcome of the case would

burden or benefit a party for a significant period of time, if not perpetually.”

Taxpayer’s brief similarly asserts:

“[T]he 2011 tax year was significant to both Ms. Ellison and the Assessor.

It was the last year that the Assessor could utilize, under ORS 308.153, an

‘exception value’ attributable to new construction.”

174 Ellison v. Dept. of Rev.

We thus conclude that the Tax Court’s determina-

tion that the department’s persistent over-valuation of the

property made taxpayer’s appeals to the Tax Court neces-

sary is not supported by substantial evidence in the record.

That erroneous determination appears to have been an

integral part of the court’s decisionmaking both in deter-

mining whether to award fees to taxpayer and in setting

the amount of the award. We therefore remand for the Tax

Court to reconsider first whether it should exercise its dis-

cretion to award fees to taxpayer by evaluating the other,

permissible factors, and without giving consideration to the

erroneous one. In the event that the court determines that

it is appropriate to award fees, the court should then deter-

mine the amount of fees to be awarded based on the factors

set out in ORS 20.075(1) and (2), again without giving con-

sideration to the erroneous factor.23

III. CONCLUSION

To summarize: We conclude that, by rejecting the

department and assessor’s request for an increase in the

BOPTA valuation, the Tax Court here found “in favor of the

taxpayer” on that request and, therefore, had discretion to

award attorney fees to taxpayer under ORS 305.490(4)(a). In

reviewing that exercise of discretion, we uphold the majority

of the factors that the court relied on in deciding to award

fees. We conclude, however, that one of the factors was not

supported by substantial evidence in the record and, there-

fore, was erroneous. Accordingly, we vacate the order of the

Tax Court awarding fees and remand for that court to exer-

cise its discretion whether to award fees without considering

the erroneous factor and to determine the amount of any fee

award under ORS 20.075(1) and (2).

The supplemental money judgment of the Tax Court

is vacated. The matter is remanded to the Tax Court for fur-

ther proceedings.

23

Because the court will be required on remand to reconsider (without

regard to the erroneous factor) both its decision to award fees and, if it does, the

amount of fees to be awarded, we do not address the department and assessor’s

alternative contention that the amount of fees awarded was excessive “in view of

[taxpayer’s] limited success.”