Opinion ID: 835212
Heading Depth: 2
Heading Rank: 2

Heading: The Claim for Damages in the Regular Division

Text: The department's complaint in the regular division, as already noted, sought an award of damages under ORS 305.437, because, in the statute's terms, the taxpayer's position in such proceeding is frivolous. (The other bases for an award under ORS 305.437, i.e., asserting a position that is groundless or instituting or maintaining proceedings primarily for delay, are not in issue here.) In determining whether a taxpayer's position is frivolous, we apply the legislature's special definition of frivolous in ORS 305.437(2) ([a]s used in this section, a taxpayer's position is `frivolous' if there was no objectively reasonable basis for asserting the position). We turn first to the meaning of the term position. The legislature did not enact a special definition of that term. The ordinary definition, in this context, is a proposition or thesis laid down: assertion, statement    the ground or point of view adopted with reference to a particular subject   . Webster's Third New Int'l Dictionary 1769 (unabridged ed. 2002). The legislature's use of the singular term position indicates an intent to use that term to denote the entirety of a taxpayer's assertions, that is, all the taxpayer's claims, defenses, and supporting arguments in the proceeding. In this context, position refers to the arguments, in their entirety, that taxpayers asserted in opposition to the department's complaint for damages under ORS 305.437. [10] This court's case law supports that view. In Detrick v. Dept. of Rev., 311 Or. 152, 806 P.2d 682 (1991), this court upheld an award of damages under ORS 305.437(1). The court stated: We consider whether the taxpayers' position is `groundless.' Consonant with our interpretation in Mattiza [ v. Foster, 311 Or. 1, 803 P.2d 723 (1990)] of what constitutes a `meritless' claim or defense, we interpret `groundless' to mean that the taxpayer's position be entirely devoid of factual or legal support. By `entirely devoid of factual or legal support,' we mean this: As to factual support, no evidence is offered that, if believed, would support a finding and a resulting judgment for the taxpayer in the Tax Court. As to legal support, there is no law  case law, statute, rule or regulation  that supports the taxpayer's claim to relief in the Tax Court. Id. at 157, 806 P.2d 682 (and internal citations omitted). The court then examined each of the two contentions that the taxpayers raised in the tax court and on appeal, determined that each contention was entirely devoid of legal and factual support, and ultimately concluded that the taxpayers' position is groundless because there is no legal support for either of their assertions. Id. at 158, 806 P.2d 682 (emphasis added). The court's construction of the term position in Detrick as the aggregate of the taxpayers' two arguments is pertinent to our interpretive inquiry here, because, in applying either statutory criterion  frivolousness or groundlessness  the court's analytical focus is on the taxpayer's position. We conclude that taxpayers' position in the regular division was not entirely devoid of factual or legal support, in the Detrick sense. Before the tax court, taxpayers asserted the factual and legal argument on which the magistrate had relied, that is, that the department had not shown any damages that were more than trivial and that proof of actual damages was required. The tax court rejected that argument but determined that it was not a frivolous argument. We agree that the argument was not frivolous, because, for reasons already discussed, that argument, expressed by the magistrate and adopted by taxpayers, was correct. The observation by the tax court that taxpayers had not made the argument that the magistrate correctly declined to award damages until the eve of the trial is not supported by the record. Taxpayers had asserted that contention consistently in their answers in the regular division. Other aspects of taxpayers' position also were not frivolous. Taxpayers argued that the department offered an insufficient causal link between taxpayers' frivolous arguments and any claimed loss or expense by the department. That argument has some merit. There was little evidence to show, for example, that all the department's auditing activities were causally linked to frivolous claims, as opposed to the need to review taxpayers' returns and paperwork for other purposes. Taxpayers also raised an argument about the meaning of the phrase instituted or maintained in ORS 305.437. Taxpayers claimed that they had not instituted or maintained the proceeding before the regular division and that the statutory phrase the taxpayer's position in such proceeding is frivolous referred to a proceeding instituted or maintained by the taxpayer. (Emphasis added.) The tax court noted that taxpayers had asserted that a rule of legal interpretation  the rule of the last antecedent  supported their construction of the statute and that they had cited a case, State v. Webb, 324 Or. 380, 386-88, 927 P.2d 79 (1996), that described the rule of the last antecedent. The tax court decided that that contention was both legally incorrect and frivolous. According to the court, the statutory phrase such proceeding necessarily applied to all proceedings before the court, regardless of which party institutes or maintains them. Croslin, 19 OTR at 77. We need not decide here whether the tax court was correct in concluding that the statutory phrase such proceeding refers to any proceeding whether or not a taxpayer institutes or maintains it. Taxpayers asserted a view of the statute that they justified with a familiar legal principle, a supporting case, and a clear discussion of and reliance on statutory text. Whether or not taxpayers were legally correct, we cannot conclude, as Detrick discussed, that taxpayers' argument in that regard was devoid of legal or factual support. The tax court erred in concluding otherwise. In summary, we hold that the tax court erred in concluding that taxpayers' position lacked an objectively reasonable basis in each division, and it should have dismissed the department's complaint for damages under ORS 305.437.