Title: Tualatin Development Co. v. Department of Revenue

State: oregon

Issuer: Oregon Supreme Court

Document:

473 P.2d 660 (1970)
TUALATIN DEVELOPMENT CO., Inc., Respondent,
v.
DEPARTMENT OF REVENUE, State of Oregon, Appellant.

Supreme Court of Oregon.
Argued and Submitted June 2, 1970.
Decided August 19, 1970.
Alfred B. Thomas, Asst. Atty. Gen., Salem, argued the cause for appellant. With him on the briefs were Lee Johnson, Atty. Gen., and Walter J. Apley, Asst. Atty. Gen.
R.W. Nahstoll, Portland, argued the cause for respondent. On the brief were Lindsay, Nahstoll, Hart, Duncan, Dafoe & Krause, and Carl R. Neil, Portland.
Before O'CONNELL, C.J., and McALLISTER, SLOAN, DENECKE, HOLMAN, TONGUE and SCHWAB, JJ.
McALLISTER, Justice.
This is an appeal by the defendant Department of Revenue from a decree of the Tax Court holding that certain property owned by plaintiff had no value for property tax purposes in the tax years 1967 and 1968. The facts of the case, as related by the Tax Court, are undisputed:
ORS 308.232 directs that all property shall be assessed at its true cash value. "True cash value" is defined by ORS 308.205 as meaning
Because there is, as the parties agree, no "immediate market value" for this property, the last sentence of ORS 308.205 governs its assessment.
The requirement that this property be maintained as open space determines or substantially affects its value. Plaintiff's objective in planning King City was to obtain Planning Commission approval of a zone change to "Planned Residential Development District", which permitted division of the property into smaller lots than those in an ordinary residential subdivision. The golf course was included in the plan to meet a part of the open space requirements for such a zone designation. Plaintiff cannot sell the land free of the zoning restrictions or put it to any use which would interfere with its function as "open space". The use of the land as a golf course has been unprofitable and will probably continue to be so; no profitable use of the land has been suggested.
Moreover, the owners of the lots in King City appear to have a right to the continued maintenance of the property as a recreational area. Mr. Sorensen, the president of the Development Company, testified that the lots were advertised and sold with reference to the inclusion of the golf course in the development plan. The golf course is referred to in the recorded use restrictions applicable to the lots. The Company received higher prices for lots bordering on the golf course than for other lots in the development, the difference in some cases amounting to as much as $4,000 per lot. Plaintiff would undoubtedly be estopped by its conduct and representations to put the land to a use which would alter its character as recreational open space.
This situation is similar to many which this court has considered in cases involving dedication of streets and other public areas. In Nicholas v. Title & Trust Co., 79 Or. 226, 240, 154 P. 391, 395 (1916), it was said:
The basis of the dedication in such cases is estoppel. 79 Or. at 241, 154 P. 391.
In Morse v. Whitcomb, 54 Or. 412, 102 P. 788, 103 P. 775 (1909), defendants were held estopped to deny that certain land in a subdivision had been dedicated as a street. In the opinion the court stressed the fact that the street had added to the value of the nearby lots:
As to the effect of representations made in a plat or development plan, see also Menstell et al. v. Johnson et al., 125 Or. 150, 262 P. 853, 266 P. 891, 57 A.L.R. 311 (1928) (building setback lines); McCoy v. Thompson, 84 Or. 141, 164 P. 589 (1917) (streets); Steel v. City of Portland, 23 Or. 176, 31 P. 479 (1892) (park).
*663 Although these cases found that public rights had been created by dedication, it was also noted in Menstell et al. v. Johnson et al., supra, that any modification of the building setback lines established by the development plan would require the consent or acquiescence of the owners of the lots already sold. 125 Or. at 167, 262 P. 853. Although there is no claim of a dedication in this case, we think the same principle of estoppel would apply[2] and those who purchased lots in King City in reliance on the golf course as a part of the development could prevent plaintiff from altering the recreational and open-space use of the land.
The question of the proper assessment valuation of land where the use is so severely restricted that its owner derives no benefit from the ownership is a new one in Oregon. The courts of other states have been confronted with similar situations and have held that when the use of land is so restricted that its ownership is of no benefit or value, the assessment for tax purposes should be nothing or merely nominal. A case particularly in point is Crane-Berkley Corporation v. Lavis, 238 App.Div. 124, 263 N.Y.S. 556 (1933), in which an assessment of park property was contested. The park was owned by a developer, who had been required by law to set aside park land for playgrounds or recreational purposes in order to obtain planning commission approval of his development scheme. The developer retained the fee title to the park areas, and deeds to the lots in the subdivision stated that the grantor would restrict the use of the areas in question to park and outdoor recreational uses for the benefit and use of the lot owners. The court held that the deeds did not grant easements to the lot owners, but that
The same result has been reached by the New York courts where the land in question was so burdened by easements as to be of no use or benefit to its legal owner. This was so in People ex rel. Poor v. O'Donnel, 139 App.Div. 83, 124 N.Y.S. 36, aff'd 200 N.Y. 518, 93 N.E. 1129 (1910), in which the land had been conveyed to trustees to be maintained as a private park for the use and benefit of the owners and occupants of a number of nearby lots; and in People ex rel. Topping v. Purdy, 143 App.Div. 389, 128 N.Y.S. 569, aff'd 202 N.Y. 550, 95 N.E. 1137 (1911), involving land which the owner had to keep open because of easements for access and air for the adjoining lots.
Defendant argues that these cases are distinguishable because the land in question was burdened by easements or rights found by the courts to be equivalent to easements, whereas there are no easements in this case and plaintiff can exclude the owners of King City lots and members of the public from the use of the golf course property. We need not decide whether this is a correct description of plaintiff's position. It seems to us unlikely that the residents of King City could be absolutely excluded from the area, but plaintiff's right to condition the use of the golf course upon the payments of membership or greens fees has not been challenged. This right has not, however, given the property any value in plaintiff's hands; what is significant is not the extent to which it can limit use of the property by others, but the limitations on plaintiff's *664 own use. In support of its argument defendant cites Matter of City of New York (Public Beach), 269 N.Y. 64, 199 N.E. 5 (1935), a condemnation case in which it was held that an award of merely nominal compensation was improper. The beach property was owned by an association whose members were all lot owners in a residential development, and was subject to easements appurtenant to those lots. The owner-members had the right to use the beach in common, and to the exclusion of the public. The city argued that the association owned only the bare legal title and was not entitled to substantial compensation.
That case is clearly distinguishable. The court treated the association as the representative of all of the lot owners and directed a substantial award  not for the taking of the encumbered fee title alone, but also for the taking of the members' rights of use. The New York court's approach does not apply to this case where there is no question of plaintiff's standing in the shoes of the King City residents. A statement from that opinion does, however, have general application here:
Taking into account such "practical considerations" the Tax Court held in this case that plaintiff's property had no true cash value for the years in question. We agree with that conclusion.
Substantial reductions in assessment were required in Lochmoor Club v. City of Grosse Pointe, 10 Mich. App. 394, 159 N.W.2d 756 (1968), where a deed restriction required the land in question to be maintained as a park, and in Borough of Englewood Cliffs v. Estate of Allison, 69 N.J. Super. 514, 174 A.2d 631 (1961). The extent of the reduction does not appear in Lochmoor, but in the Allison case, involving land held in trust for the benefit of the public on terms which precluded profitable development, it was held that an assessed valuation one tenth that of the same land had it been unencumbered by the trust would fairly reflect the remote possibility of the sale of the bare legal title.
Assigning a money value to such a speculative possibility seems to us unnecessary; the figure could only be arrived at arbitrarily. We agree with the Tax Court that the golf course property was without taxable value during the years involved in this case. It was clearly of no economic benefit to plaintiff, nor is there anything in the evidence to indicate that it would have been of value to anyone else. There was no market for the land, and plaintiff's offer to donate it to the City of King City was refused. The decision of the Tax Court was amply supported by the evidence, and is affirmed.
[1]  King City was incorporated in 1966. Its present boundaries substantially coincide with those of the area developed by plaintiff.
[2]  For a discussion of the relationship between the principles of dedication and estoppel see Parks, The Law of Dedication in Oregon, 20 Or.L.Rev. 111, 134-137 (1941).