Cramer v. Harney County Assessor

• Court: Oregon Tax Court
• Decided: November 17, 2023
• Docket: TC-MD 230078R
• Status: Unpublished

Opinion

IN THE OREGON TAX COURT MAGISTRATE DIVISION Property Tax

WILLIAM D. CRAMER, JR., ) and ROBIN CRAMER, ) ) Plaintiffs, ) TC-MD 230078R ) v. ) ) HARNEY COUNTY ASSESSOR, ) ) Defendant. ) DECISION

Plaintiffs’ appealed Defendant’s Board of Property Tax Appeals (BOPTA) Real Property

Order dated March 9, 2023, for the 2022-23 tax year. A trial was held remotely via WebEx on

May 17, 2023. Plaintiffs, William D. Cramer, Jr., (Cramer) and Robin Cramer, appeared on their

own behalf. Cramer, Kirby Letham (Letham), Randy Fulton (Fulton), and Curt Blackburn

(Blackburn) testified on behalf of Plaintiffs. Karen Zabala (Zabala) appeared and testified on

behalf of Defendant. Plaintiffs’ Exhibits 1 through 7 and Defendant’s Exhibits A through N

were admitted into evidence without objection.

I. STATEMENT OF FACTS

Plaintiffs filed their Complaint on March 18, 2023, challenging the real market value of

property identified as Account 181 (subject property) for the 2022-23 tax year. (Compl at 1.)

For the 2022-23 tax year, Defendant assessed the real market value of the subject property at

$64,500. (Compl at 2.) Plaintiffs filed an appeal with BOPTA, which ordered the value be

sustained. (Id.) Plaintiffs request the court lower the subject property’s real market value to

$39,000. (Id. at 1.) Defendant requests the court uphold the real market value at the same

amount found by BOPTA.

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DECISION TC-MD 230078R 1 The subject property is a 10,000-square-foot parcel consisting of two vacant lots zoned

for commercial use, located in Burns, Oregon, near the city of Hines, Oregon. (Id. at 2; Ex 3 at

1, 2; Ex 7.) The property lacks sewer, water access, and improvements. The property is situated

adjacent to and due east of the two lots upon which Plaintiffs’ primary residence sits. (See Ex 3

at 6-7; see also Ex E.)

In August 2022, the Swarthout family sold the subject property to the Blackburns, who

sold the property to Plaintiffs in November 2022. (See Exs 1, 2, 7.) The parties’ dispute

primarily concerns whether Plaintiffs’ purchase of the subject property and the prior sale of the

subject property constitute arm’s-length transactions, such that they may be used as evidence of

the property’s real market value.1

Between May of 1973 and late August of 2022, the subject property transferred

ownership on numerous occasions, though during that period it was always owned in various

configurations by members of the Swarthout family, whether owned outright, held in trust, or

held by the estate of a deceased Swarthout family member. (See Ex 7.) On December 18, 2015,

L. Swarthout and Donna Swarthout obtained title to the subject property in equal, one-half

interests from a trust. (Id.) Zabala, Harney County Assessor and Tax Collector, testified that, in

2018, Donna Swarthout passed away. On August 26, 2022, three equal interests in the subject

property were transferred from the Estate of Donna-Chase Swarthout with L. Swarthout still

owning the majority, one-half interest. (Id.) Immediately thereafter, a warranty deed was

recorded transferring ownership of the subject property to Blackburn and his spouse. (Id. at 2;

see also Ex 1.)

1 It is unusual for the court to review the extended ownership and sales history of a subject property. However, in this case, the prior sales history, marketing of the property, and Plaintiffs’ purchase of the property must be considered to determine whether Plaintiffs’ purchase and the prior sale of the subject property constituted arm’s-length transactions.

DECISION TC-MD 230078R 2 Letham, Principal Broker at Paramore Real Estate (Paramore), testified that Paramore

served as the real estate broker in facilitating the Swarthouts with the sale of the subject property.

In 2021, Paramore listed the property with an asking price of $50,000. Although Letham was

unable to find supporting documentation, he testified he recalls Paramore was involved in efforts

to sell the subject property as early as 2013.2 Letham testified that when listing the property for

sale in 2021, Paramore advertised the property on Facebook, placed an advertising sign at the

site of the subject property, posted the listing in Paramore’s front office window, posted the

property on its own website, and used a multiple listing system, which advertised the property on

Zillow and other real estate marketing websites. (See Ex 3 at 2.)

In December 2021, an offer was placed on the property for a purchase price of $12,000.

L. Swarthout rejected the offer, which Letham described as “very low.” Letham testified that,

excluding the December 2021 offeror and Blackburn, no potential buyers ever called him to

express an interest in the subject property, nor were any other offers ever placed on the property.

Letham testified that on at least one occasion, Paramore contacted L. Swarthout to discuss

lowering the price because of the lack of interest; however, he declined to do so.

Letham described the condition of the real estate market in Burns with respect to

commercial properties as difficult to assess, as he has observed numerous commercial lots sit on

the market for many years without attracting any interested buyers. Conversely, he has observed

buyers unexpectedly appear who are committed to buying a specific piece of commercial

property. Nonetheless, Letham opined market conditions were no better in January 2022—a

period of time near the subject property’s assessment date for the 2022-23 tax year—than when

2 Letham testified that his unsuccessful efforts to locate documentation of Paramore’s earlier attempts to sell the subject property may be attributable to the fact that Paramore only began using the specific multiple listing system it currently utilizes back in 2018.

DECISION TC-MD 230078R 3 the Swarthouts sold the property in August 2022. Rather, he testified market conditions were in

a usual slowdown period for winter in January 2022.

Blackburn, a Burns real estate broker with over 33 years of experience, became interested

in purchasing the subject property because Paramore had erected a sign on the lot advertising its

business, which Blackburn wanted to replace with a sign for his own business. He testified that

he did not know the primary owner of the property, L. Swarthout, personally, though he knew of

him by reputation. In February 2022, Blackburn wrote a cash offer to purchase the subject

property for $35,000. Blackburn testified that, based on his professional experience and

knowledge of the local market, his offer was reflective of the property’s real market value.

Blackburn’s purchase was finalized in August 2022 when probate proceedings concluded for the

Estate of Donna-Chase Swarthout. (See Ex 1; see also Ex 7 at 2.) Although Letham testified

there had been a change in the Swarthouts’ “family dynamics,” he testified that, to his

knowledge, there was no indication the Swarthouts were under duress or compulsion to sell the

property.

Shortly after Blackburn’s purchase of the subject property, Plaintiffs became aware of the

transaction and approached Blackburn about purchasing the property. Cramer testified the

subject property was of unique value to him, as trucks would often park on the property and

cause significant damage by crashing into the cinderblock wall dividing the subject property and

his residence. Additionally, cattle trucks would often park on the subject property, emitting

odors, which affected the use and enjoyment of his residence. Cramer testified he had been

aware the property was listed for sale for many years, and he had been interested in purchasing it

for an extended period of time. Although Blackburn had not listed the subject property for sale,

he agreed to sell the property to Plaintiffs so long as they would (1) pay a price grossing him a 10

percent profit on the property and (2) grant him an easement to leave the sign advertising his

DECISION TC-MD 230078R 4 business on the property for 10 years. Both parties agreed, and on November 17, 2022,

Blackburn transferred title to Plaintiffs for $39,000. (See Ex 2.)

Zabala, Harney County Assessor and Tax Collector, testified that neither sale of the

subject property in 2022 was an arm’s-length transaction and, thus, argued that neither

transaction is indicative of the subject property’s real market value. Relying upon the

Department of Revenue’s 2017 Ratio Study Procedures, which provide that “[a] conveyance by

an executor or trustee under powers granted in a will may not represent fair market value[,]”

Zabala asserted the Blackburns’ purchase of the subject property was not an arm’s-length

transaction because the transaction was not initiated until after probate proceedings began for the

Estate of Donna-Chase Swarthout. (Ex B at 2.) Further, Zabala argued Plaintiffs’ purchase of

the subject property was not an arm’s-length transaction because the property was not listed for

sale on the open market. Plaintiffs argue both transactions were at arm’s-length because the

Swarthouts were under no duress to sell the property during the first sale. For the second,

Blackburn and Cramer engaged in negotiations, and although the property was not listed on the

market, Cramer was aware the property had been previously listed on the market for many years.

Both parties valued the subject property relying only on the comparative sales analysis.

Plaintiffs presented two comparable sales as evidence of value. Comparable 1 (Fulton property)

is a 40,000-square-foot vacant, commercial property and full city block, consisting of eight lots,

equipped with both sewer and water, located one block away from the subject property. (Ex 3 at

5; see also Ex J.) Four of the eight lots have direct highway frontage. (See Ex E.) Comparable

1 sold in November 2022 for $105,000. (Ex 3 at 3.) The parties agree Comparable 1 is in poor

condition requiring on-site cleanup and will incur a significant cost to cure. Plaintiffs made no

adjustments to Comparable 1.

DECISION TC-MD 230078R 5 For tax year 2022-23, Defendant assessed the real market value of the Fulton property at

$141,500. (Ex J at 1.) Although Zabala estimated the cost to cure at $40,000, she maintained

Defendant’s $141,500 assessment is accurate.

Plaintiffs’ Comparable 2 (Oltman property) is a 15,681-square-foot vacant property,

consisting of two commercial lots, equipped with both sewer and water, located in nearby Hines,

Oregon. (Ex 3 at 9.) Comparable 2 sold in August 2021 for $70,000. (Id. at 8.) Blackburn

testified that Plaintiffs selected Comparable 2 to show the value of property in an area that is

generally more desirable to interested commercial property buyers than the area of the subject

property; the area is located where the cities of Burns and Hines intersect. Additionally,

Blackburn explained that there is a considerably higher traffic count and more available parking

in the area of Comparable 2. Plaintiffs made no adjustments to Comparable 2. For tax year

2021-22, Defendant assessed the real market value of the Oltman property at $36,900. (Ex M at

1-2.)

Zabala presented Harney County Assessment Reports for seven properties, some located

in the area of the subject property, and some located closer to Hines, testifying that only some

had recently sold, such as Accounts 180 (Comparable 1) and 219 (Comparable 2). (See Exs G-

M.) Comparable 1 consists of two lots, is 10,000 square feet, and is located adjacent to and due

south of the subject property. (Ex E; Ex G at 1.) For the 2021-22 tax year, Defendant assessed

the real market value of Comparable 1 at $99,760 with $76,500 attributable to land and $23,260

attributable to improvements. (Ex G at 1.) On June 14, 2022, a statutory warranty deed

transferring title to Comparable 1 was recorded for consideration of $105,000. (Id. at 2.)

Comparable 2 consists of two lots and is located one block south of the subject property. (Ex E.)

For the 2022-23 tax year, Defendant assessed the real market value of Comparable 2 at $170,490

with $66,900 attributable to land and $103,590 attributable to improvements. (Ex I at 1.) On

DECISION TC-MD 230078R 6 July 12, 2022, a statutory warranty deed transferring title to Comparable 2 was recorded for

consideration of $90,000. (Id. at 2.) Defendant made no adjustments to any of the seven

properties for which it presented its assessment reports.

In addition, Defendant presented a list of all 12 vacant, commercial property sales

occurring in Harney County during the 2021 and 2022 calendar years. (See Ex C.) Of each of

the 12 sales, Zabala testified that only some are located near the subject property, having earlier

noted that there are inadequate sales of commercial property in Harney County for purposes of

indexing. Zabala made no adjustments to any of the 12 sales.

II. ANALYSIS

The issue before the court is the real market value of the subject property for the 2022-23

tax year. As the party seeking affirmative relief, Plaintiffs bear the burden of proof and must

establish their case by a preponderance of the evidence. ORS 305.427.3 A “[p]reponderance of

the evidence means the greater weight of evidence, the more convincing evidence.” Feves v.

Dept. of Rev., 4 OTR 302, 312 (1971). “[I]t is not enough for a taxpayer to criticize a county’s

position. Taxpayers must provide competent evidence of the [real market value] of their

property.” Woods v. Dept. of Rev., 16 OTR 56, 59 (2002) (citation omitted). “[I]f the evidence

is inconclusive or unpersuasive, the taxpayer will have failed to meet his burden of proof * * *.”

Reed v. Dept. of Rev., 310 Or 260, 265, 798 P2d 235 (1990). Once evidence of value has been

presented by both parties, “the court has jurisdiction to determine the real market value or correct

valuation on the basis of the evidence before the court, without regard to the values pleaded by

the parties.” ORS 305.412.

3 The court’s references to the Oregon Revised Statutes (ORS) are to the 2021 edition.

DECISION TC-MD 230078R 7 A. Real Market Value, Generally

“Real market value is the standard used throughout the ad valorem statutes except for

special assessments.” Richardson v. Clackamas County Assessor, TC-MD 020869D, 2003 WL

21263620 at *2 (Or Tax M Div, Mar 26, 2003) (citation omitted). “Real market value” is

defined as:

“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.”

ORS 308.205(1). The assessment date for the 2022-23 tax year is January 1, 2022. ORS

308.007; ORS 308.210.

The real market value of property “shall be determined by methods and procedures in

accordance with rules adopted by the Department of Revenue * * *[.]” ORS 308.205(2). “The

department’s rules call for an appraiser to value the property according to its ‘highest and best

use.’” Hewlett-Packard v. Benton County Assessor, 357 Or 598, 602, 356 P3d 70 (2015). The

three approaches to value that must be considered are: (1) the cost approach; (2) the sales

comparison approach; and (3) the income approach. OAR 150-308-0240(2)(a). Although all

three approaches must be considered, all three approaches may not be applicable in a given case.

Id.

Here, both parties relied exclusively on the sales comparison approach, finding both the

cost and income approach inapplicable in this matter. The court agrees with the parties. The

cost approach is inapplicable because the property contains no new construction, and the income

approach is inapplicable because Plaintiffs do not own the property for purposes of generating

income. The sales comparison approach, which “relies on sale prices of other properties that can

serve the same highest and best use as the subject property[,]” is most relevant. Hewlett-

Packard, 357 Or at 603.

DECISION TC-MD 230078R 8 B. Subject Property’s Purchase Price as Evidence of Real Market Value in the Sales Comparison Approach

In applying the sales comparison approach, “only actual market transactions of property

comparable to the subject, or adjusted to be comparable, may be used.” OAR 150-308-

0240(2)(c).

“All transactions utilized in the sales comparison approach must be verified to ensure they reflect [arm’s-length] market transactions. When non-typical market conditions of sale are involved in a transaction (duress, death, foreclosures, interrelated corporations or persons, etc.), the transaction may not be used in the sales comparison approach unless market-based adjustments can be made for the non-typical market condition.”

The parties dispute whether either sales price for the subject property from 2022 may be

used as evidence of the property’s real market value. Both the Supreme Court and this court

previously determined that it is permissible to use a prior sales price of the subject property as

evidence of market value in the sales comparison approach, so long as the sale of the subject

property was (1) recent, (2) voluntary, and (3) an arm’s-length transaction. Kem v. Dept. of Rev.,

267 Or 111, 114, 514 P2d 1335 (1973); see also Acosta v. Multnomah County Assessor, TC-MD

200140R, 2021 WL 4963136 at *4 (Or Tax M Div, Oct 26, 2021). If those three criteria are

satisfied “between a buyer and seller, both of whom are knowledgeable and willing, then the

sales price, while certainly not conclusive, is very persuasive of the market value.” Kem, 267 Or

at 114.

Whether a sale is sufficiently recent depends less on the length of time between the date

of sale and assessment date and more on “the similarity of conditions affecting value at the time

of the transaction and conditions affecting value at the time of the assessment.” Sabin v. Dept. of

Rev., 270 Or 422, 426-27, 528 P2d 69 (1974) (holding that a sale occurring almost two years

after the assessment date was persuasive of value, given no evidence of change in market

DECISION TC-MD 230078R 9 conditions). In the absence of evidence of change in conditions, a sale occurring after the

assessment date is no less persuasive than it would otherwise be merely because it occurred after

the assessment date. Ernst Brothers Corp. v. Dept. of Rev., 320 Or 294, 305, 882 P2d 591 (1994)

(citing Sabin, 270 Or at 427).

Here, the Blackburns purchased the subject property in August 2022—eight months after

the assessment date—and Plaintiffs purchased the subject property in November 2022—11

months after the assessment date. Little evidence reflecting market conditions—or changes

thereto—was presented by either party. Letham testified that the market as of January 2022 was

no better than it was in August 2022. Absent evidence to the contrary, the court is persuaded that

conditions affecting the value of the subject property were generally consistent in January,

August, and November of 2022.

With respect to the second and third criteria, this court previously adopted the Appraisal

Institute’s definition of “arm’s-length” as “[a] transaction between unrelated parties under no

duress.” Acosta, 2021 WL 4963136 at *4 (citation and internal quotation marks omitted). As

such, analysis of the final two factors is interrelated. The “arm’s-length analysis often includes

an evaluation of whether the transaction was voluntary or made under duress, and whether there

existed a relationship between the parties.” Id. In Acosta, this court elected to “view an arm’s-

length sale as one that on the whole resembles a typical market transaction.” Id. (quotation

marks omitted).

Defendant argues the Blackburns’ August 2022 purchase of the subject property was not

an arm’s-length transaction because the transaction was not initiated until after probate

proceedings began for the Estate of Donna-Chase Swarthout. This court has routinely held that

where the seller of a property may be compelled to sell the property at a lower value in order to

settle debt or some other liability a transaction is not considered voluntary or arm’s-length. See

DECISION TC-MD 230078R 10 Rouda v. Clatsop County Assessor, TC-MD 160206N, 2017 WL 1535213 at *5 (Or Tax M Div,

Apr 28, 2017) (“A foreclosure sale does not represent a voluntary transaction between a buyer

and a seller”); see also Garton and Associates Realtors, LLC v. Umatilla County Assessor, TC-

MD 200077R, 2021 WL 4188110 at *3 (Or Tax M Div, Sept 15, 2021) (Where the sellers faced

“legal fees in the probate estate and potential administrative or even criminal action pertaining to

the property[,]” the court declined to rely on the sale as an arm’s-length transaction). However,

the mere fact that a piece of property was sold as part of the probate process does not by itself

suffice to show duress or compulsion to sell existed; it merely casts doubt as to whether either

did exist.

Here, Letham testified that, to his knowledge, the Swarthouts were under no duress to sell

the property. Letham testified he recalls the Swarthouts making efforts as early as 2013 to sell

the property—before Donna Swarthout’s eventual passing. In 2021, Paramore listed the property

on the market, advertising it online, in its office window, and with a sign at the site of the

property. Letham testified that, on one occasion, L. Swarthout rejected an offer placed on the

subject property, and on another, L. Swarthout declined Paramore’s request to lower the price of

the subject property. It does not appear that the Swarthout family were under any economic

stress requiring them to sell the property. Although the property sold during probate

proceedings, no evidence was presented to indicate the transaction was entered into

involuntarily, under duress, or under economic distress. Here, the facts merely indicate

Swarthout was an unmotivated seller, holding out for what he considered to be a reasonable

offer. Letham did acknowledge a change in the Swarthouts’ family dynamics, however, the

court declines to make a finding of duress from that fact alone. Moreover, the parties had no

preexisting relationship, as Blackburn was only interested in the property for financial gain and

to eliminate a competing business’s advertisement on the property.

DECISION TC-MD 230078R 11 Defendant also argues Plaintiffs’ November 2022 purchase of the subject property was

not an arm’s-length transaction because Blackburn never listed the subject property for sale on

the open market. The court considers that a negative factor in analyzing whether the sale

represented an arm’s length transaction. Here, Cramer, approached Blackburn, an experienced

local real estate agent, and engaged in negotiations which appeared to be of a sophisticated

nature. Blackburn, acting under no compulsion to sell the property, agreed to sell the property

after negotiating himself a 10 percent profit along with a 10-year easement to continue

advertising his business on the property. Although the November 2022 sale of the subject

property is not a perfect example of an arm’s-length sale, it represented persuasive evidence that

it resembled a typical market transaction between a knowledgeable buyer and seller. Thus, the

court considers it persuasive of the subject property’s real market value.

C. Evaluation of the Parties’ Comparable Market Sales as Evidence of Real Market Value

Plaintiffs selected two comparable sales for its market analysis of the subject property,

having made no adjustments to either. Comparable 1 is located near the subject property, though

it is significantly larger and is equipped with sewer and water. Without guidance from Plaintiffs

on how to calculate the appropriate adjustments for the subject property’s smaller size and lack

of sewer and water access, the court cannot rely on Comparable 1. See OAR 150-308-

0240(2)(c). Comparable 2 is located in an entirely different area than the subject property—one

which Plaintiffs admit is generally more desirable for commercial buyers—and is equipped with

sewer and water. Like Comparable 1, the court cannot rely on Comparable 2 as Plaintiffs did not

adjust for the change in location—a change which arguably renders Comparable 2 non-

comparable in its entirety—nor did Plaintiffs adjust for sewer and water.

Defendant offers assessment reports as evidence, admitting that only some of the

properties for which reports were provided had recently sold. As addressed earlier, “only actual

DECISION TC-MD 230078R 12 market transactions of property comparable to the subject * * * will be used[.]” OAR 150-308-

0240(2)(c) (emphasis added). Without a recent sale or “market transaction,” the court cannot

rely on Defendant’s assessment reports. Of Defendant’s comparable properties that did recently

sell, each of the properties possessed one or more of the following differences from the subject

property: the property was (1) equipped with sewer and water, (2) had a building constructed on

it, or (3) was located in a more commercially viable area than the subject property. Like

Plaintiffs, Defendant made no adjustments to provide the court with guidance on how to account

for the impact these differences had on value. Thus, the court is not persuaded by Defendant’s

comparable sales.

D. Real Market Value Conclusion

The court deems Plaintiffs’ November 2022 purchase of the subject property as the best

evidence in determining the real market value of the subject property under the sales comparison

approach. Thus, this court finds the real market value of the subject property as of the

assessment date was $39,000.

E. Costs and Disbursements

Plaintiffs filed a Statement for Costs and Disbursements on May 17, 2023, specifically

requesting they be reimbursed for the court’s filing fee, fees to copy exhibits, and fees to mail

exhibits, totaling a requested sum of $98.02. Defendant did not file an objection to Plaintiffs’

request.

Magistrates have discretionary authority to award a prevailing party’s costs and

disbursements “as in equity suits in the circuit court.” ORS 305.490(3); Wihtol v. Dept. of Rev.,

21 OTR 260, 267-68 (2013). Tax Court Rule–Magistrate Division (TCR–MD) 16 (A) defines

“[c]osts and disbursements” as:

“reasonable and necessary expenses incurred in the prosecution or defense of an

DECISION TC-MD 230078R 13 action other than for legal services, and include the filing fee; * * * the necessary expense of copying of any public record, book, or document used as evidence for trial; and any other expense specifically allowed by agreement, by these rules, by TCR 68 A(2), or by other rule or statute.”

Plaintiffs are the prevailing party in this appeal, and their request consists of “reasonable

and necessary expenses” incurred in the prosecution of their case. Thus, Plaintiffs’ request for

costs and disbursements is granted. TCR-MD 16 (A).

III. CONCLUSION

Upon careful consideration, the court concludes Plaintiffs satisfied their burden of proof;

thus, their request for a reduction in real market value is granted. Because Plaintiffs are the

prevailing party, their request for costs and disbursements is also granted. Now, therefore,

IT IS THE DECISION OF THIS COURT that the real market value of the subject

property for the 2022-23 tax year is $39,000.

IT IS FURTHER DECIDED that Plaintiffs’ request for costs and disbursements in the

sum of $98.02 is granted.

Dated this ____ day of November 2023.

Richard Davis Magistrate

If you want to appeal this Decision, file a complaint in the Regular Division of the Oregon Tax Court, by mailing to: 1163 State Street, Salem, OR 97301-2563; or by hand delivery to: Fourth Floor, 1241 State Street, Salem, OR.

Your complaint must be submitted within 60 days after the date of this Decision or this Decision cannot be changed. TCR-MD 19 B.

This document was signed by Magistrate Richard Davis and entered on November 17, 2023.

DECISION TC-MD 230078R 14