Equity Land Resources, Inc. v. Department of Revenue

• Decision Date: 18 April 1974
• Citation: 521 P.2d 324,268 Or. 410
• Parties: EQUITY LAND RESOURCES, INC., an Oregon corporation, Appellant, v. DEPARTMENT OF REVENUE, State of Oregon, Respondent (two cases).
• Court: Oregon Supreme Court

Page 324

521 P.2d 324

268 Or. 410

EQUITY LAND RESOURCES, INC., an Oregon corporation, Appellant, v. DEPARTMENT OF REVENUE, State of Oregon, Respondent (two cases).

Supreme Court of Oregon, In Banc.

Argued and Submitted Jan. 7, 1974.

Decided April 18, 1974.

Edward L. Clark, Jr., Salem, argued the causes for appellant. With him on the briefs were Clark, Marsh & Lindauer, Salem.

Alfred B. Thomas, Asst. Atty. Gen., Salem, argued the causes for respondent. With him on the brief were Lee Johnson, Atty. Gen., and Theodore W. de Looze, Chief Tax Counsel, Salem.

HOLMAN, Justice.

Plaintiff appealed from a decree of the Oregon Tax Court which sustained defendant's $1,700,000 evaluation of the real property upon which plaintiff is obligated to pay ad valorem taxes. 5 OTR Adv Sh 222 (1973). It was stipulated that the value of the property for tax purposes was the same for both 1971 and 1972, the tax years in question. Since real property is evaluated as of January 1 for each tax year, the date of the assessment under consideration is January 1, 1971. This is the second case concerning the taxable value of this piece of property. See Commonwealth v. Dept. of Rev., 4 OTR 80 (1970), reversed, 259 Or. 140, 484 P.2d 1103 (1971).

The property in question is comprised of an entire block in the core of the city of Salem and is developed as a shopping center. All improvements and approximately one-third of the land were purchased in fee by plaintiff and the balance of the land is controlled by it as lessee by long-term ground leases under the provisions of which plaintiff is obligated to pay all real property taxes for both land and improvements. Plaintiff purchased its entire interest in the shopping center as of January 1, 1971, the assessment date in question, for $750,000. The principal dispute in this case concerns the value of plaintiff's interest. Also in dispute, but with less divergence, is the owners' interest in the fee of the two-thirds of the land under long-term ground leases to plaintiff and upon which plaintiff is obligated to pay the taxes.

Plaintiff claims the trial court erred in failing to use the price at which it purchased its interest in the property as the value of that interest for tax purposes. The evidence of the defendant relating to this interest was based primarily upon the income approach by its use of what it considered economic rents rather than the actual rents which the property was bringing. ORS 308.232 requires that all real property be assessed at its 'true cash value.' ORS 308.205 defines 'true cash value' to be 'market value as of the assessment date.' Defendant's rule OAR 150--308.205--(A) 1.a. provides:

'a. Market Value as a basis for true cash value shall be taken to mean the highest price in terms of money which a property will bring if exposed for sale in the open market, allowing a period of time typical for the particular type of property involved and under conditions where both parties to the transaction are under no undue compulsion to sell or buy and are able, willing and reasonably well-informed.'

In Portland Canning Co. v. Tax Com., 241 Or. 109, 404 P.2d 236 (1965), we reviewed these statutes and similar regulations and said:

'Clearly the dominant note of the legislation is that, if possible, value is to be ascertained in accordance with market value. While the commission has been given power to make regulations setting forth procedures as to how this may be done, it cannot vary the mandate of the law under this guise. If a market existed for the kind of property being assessed, the property had to be evaluated by the market data approach. The commission has no power to permit the evaluation of the property by the exclusive means of the cost approach to determine the value to the owner when a market in fact exists.' 241 Or. at 113, 404 P.2d at 238.

Although defendant relied primarily upon the income approach rather than the cost approach, the statement is nonetheless applicable.

In the trial court's opinion the sale price of the subject property as illustrative of its true cash value is discredited in the following manner:

'The defendant, in rebuttal, quoted the oft-repeated adage that 'one sale doesn't make a market.' This rule-of-thumb is supported by a number of cases holding that the sale price of a specific item of real estate is not conclusive as to its fair market value. (citations.) In this court's view a single sale may be some indication of market value, but it is suspect. (citation.) This is especially true when the subject property constitutes the sale (although the defendant, in its administrative rule, OAR 150--308.205(A) b, indicates that such sales are 'relevant') * * *.' 5 OTR Adv Sh 222 at 229--30.

The facts surrounding the sale of the property are fairly stated by the trial court in its opinion as follows:

'The interest of the original developer, Commonwealth, Inc., was taken over by...