S46390 Avis Rent A Car System, Inc. v. Dept. of Rev.

SUPREME COURT CASES

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State: Oregon

Docket No: 4138;SCS46390(Control)

Case Date: 03/03/2000

Filed: March 3, 2000

IN THE SUPREME COURT OF THE STATE OF OREGON

AVIS RENT A CAR SYSTEM, INC.,
BUDGET RENT A CAR SYSTEMS, INC.,
DOLLAR RENT A CAR and THE HERTZ CORPORATION,

Plaintiffs-Appellants,

DEPARTMENT OF REVENUE,
State of Oregon,

Defendant-Respondent,

and

MULTNOMAH COUNTY,
a political subdivision of the State of Oregon,

Intervenor-Respondent.

(TC 4138; SC S46390 (Control))

_________________________________________________________________

NATIONAL CAR RENTAL SYSTEMS, INC.,

Plaintiff-Appellant,

DEPARTMENT OF REVENUE,
State of Oregon,

Defendant-Respondent,

and

MULTNOMAH COUNTY,
a political subdivision of the State of Oregon,

Intervenor-Respondent.

(TC 4139; SC S46402)

_________________________________________________________________

(Cases Consolidated)

En Banc

On appeal from the Oregon Tax Court.*

Argued and submitted January 7, 2000.

James N. Gardner, of Gardner & Gardner, Attorneys, P.C., Portland, argued the cause for plaintiffs-appellants Avis Rent A Car System, Inc., Budget Rent A Car Systems, Inc., Dollar Rent A Car, and the Hertz Corporation. With him on the briefs was Lynda N. Gardner.

Timothy E. Miller, of Miller & Associates, Lake Oswego, on behalf of plaintiff-appellant National Car Rental Systems, Inc., adopted in whole the briefs filed by James N. Gardner, with one supplement.

James C. Wallace, Assistant Attorney General, Salem, argued the cause for defendant-respondent. With him on the brief was Hardy Myers, Attorney General.

No appearance by intervenor-respondent.

KULONGOSKI, J.

The judgment of the Tax Court is affirmed.

*14 OTR 487 (1998).

KULONGOSKI, J.

In these consolidated cases, taxpayers are five rental car companies operating out of the Portland International Airport. (1) The airport is owned and operated by the Port of Portland (Port), a political subdivision of the State of Oregon whose property is exempt from taxation. See ORS chapter 778 (creating Port and defining its functions and powers); ORS 307.090 (exempting Port property from taxation). Under written "Operating Agreements" (agreements) executed by taxpayers and the Port, taxpayers operated as "Concessionaires," utilizing designated areas of airport property for car rental, return, and maintenance. The Multnomah County Assessor assessed ad valorem taxes on taxpayers' property based on the value of the Port's publicly owned property that taxpayers were using as private parties. The Tax Court upheld the assessments, and this appeal followed.

In general, state and local government property is exempt from property taxation. ORS 307.090. An exception to that general rule is set out in ORS 307.110(1), which provides:

"Except as provided in ORS 307.120, all real and personal property of this state or any institution or department thereof or of any county or city, town or other municipal corporation or political subdivision of this state, held under a lease or other interest or estate less than a fee simple, by any person whose real property, if any, is taxable, except employees of the state, municipality or political subdivision as an incident to such employment, shall be subject to assessment and taxation for the assessed or specially assessed value thereof uniformly with real property of nonexempt ownerships."

Thus, in order for the municipal property used by taxpayers to be taxable under ORS 307.110(1), it must be "held under a lease or other interest or estate less than a fee simple." We begin, then, by examining whether the agreements entered into by taxpayers and the Port were leases, making the subject property taxable under ORS 307.110(1).

There are three essential elements of a lease: a description of the property, the duration of the term, and the rental consideration. See Port of Coos Bay v. Dept. of Rev., 298 Or 229, 233, 691 P2d 100 (1985) (discussing whether agreement entered into by taxable individuals and port was a lease, making subject property taxable under ORS 307.110(1)). Examining the agreements in this case, we observe that the three essential elements of a lease were present: (1) the agreements described, in detail, the premises designated for use by taxpayers; (2) the agreements expressly terminated June 10, 1994, and provided that, on termination, taxpayers could hold over on a month-to-month basis; and, (3) taxpayers were required to pay annual rental and "privilege" fees "[a]s part of the consideration for the rights and privileges granted [in the agreement] and the use of the Designated Premises." We note also that, although the agreements imposed more detailed obligations upon taxpayers than are found in a typical lease, "[n]o particular words are necessary to create a lease. If the agreement grants sufficient control over the premises to fulfill the requirement of possession, a leasehold is created." Id. at 234.

In that regard, taxpayers contend that, under the agreements, they did not have sufficient control over the designated premises to constitute a taxable possessory interest in the property. Taxpayers concede that the exclusivity inquiry is governed by the legally permitted use of the designated premises as provided by the agreements. However, taxpayers assert that, because the agreements themselves reserved to the Port, its agents, and the general public the right of ingress and egress through the designated premises, taxpayers did not enjoy "exclusive possession" of the property within the meaning of OAR 150-307.110(1)(2) and, consequently, that ORS 307.110(1) does not apply. (2) Relying on the last two sentences of OAR 150-307.110(1)(2), taxpayers argue that the agreements expressly provided that they could not "exclude others," and that the premises "must be shared," rendering their interest in the designated premises less than possessory.

In Port of Coos Bay, 298 Or at 233, this court held that the inability to exclude others does not prevent an agreement from creating a leasehold interest. Port of Coos Bay involved an agreement entered into by the port and private individuals concerning the use of a dry boat storage unit. That agreement reserved to the port and its agent the right of "free access at all times" for inspection purposes. Id. Applying ORS 307.110(1), the court held that the dry boat storage units were leased to taxable individuals within the meaning of the statute and, thus, were subject to ad valorem taxation. Id. at 234. Similarly, in Sproul et al v. Gilbert et al, 226 Or 392, 359 P2d 543 (1961), this court held that the possessory interests of the taxpayers, who had grazing privileges on federal land, were taxable. (3) As in the case at bar, Sproul involved a situation in which third parties were permitted to enter upon and use the property at issue. Despite that limited use by third parties, the court in Sproul concluded that the taxpayers had exclusive possession with respect to the principal character of the property and, therefore, had a taxable possessory interest. Id. at 408-10, 420.

In both Port of Coos Bay and Sproul, the taxpayers were held to have taxable possessory interests in the subject property despite the fact that the agreements at issue in those cases expressly provided for limited "shared" use by third parties. Taxpayers in this case nonetheless assert that, because OAR 150-307.110(1)(2) provides that "shared" use is less than exclusive, their interest in the designated premises is not taxable. We note, however, that OAR 150-307.110(1) is an interpretive rule, not separately substantive -- that is, the rule merely explains the way in which the Department of Revenue (department) understands that the legislature intended ORS 307.110(1) to be interpreted. See ORS 305.100 (granting to department interpretative, but not substantive, rulemaking authority). To the extent that the rule is inconsistent with legislative intent, as determined by this court, the rule is invalid. See Fisher Broadcasting, Inc. v. Dept. of Rev., 321 Or 341, 355, 898 P2d 1333 (1995) (legislative choice under statute not subject to being overruled by department regulation); U. of O. Co-Oper. v. Dept. of Rev., 273 Or 539, 550-51, 542 P2d 900 (1975) ("[A]n administrative agency may not, by its rules, amend, alter, enlarge or limit the terms of a legislative enactment."). Consequently, we reject taxpayers' argument that OAR 150-307.110(1) is dispositive of this case. We conclude that, despite the limited use by the Port and third parties, taxpayers enjoyed exclusive possession of the principal character of the property.

Because we agree with the Tax Court that the reasoning in Sproul and its analysis under ORS 307.060 apply equally under ORS 307.110(1) to the facts of this case, we affirm the Tax Court's holding that "[taxpayers] ha[d] sufficient control and exclusive rights to constitute an interest subject to taxation under ORS 307.110."

Taxpayers also argue that the assessments of the subject property were invalid, because the assessments did not identify and describe accurately the specific airport property subject to property taxation under ORS 307.110(1). We have considered all taxpayers' arguments on that issue and conclude that none is well taken. Further explication of our reasoning on this fact-bound issue would not benefit the public or the bar.

The judgment of the Tax Court is affirmed.

1. Taxpayers in the first case are Avis Rent A Car System, Inc., Budget Rent A Car Systems, Inc., Dollar Rent A Car, and the Hertz Corporation. Taxpayer in the second case is National Car Rental Systems, Inc. All references to taxpayers herein include all five rental car companies.

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2. OAR 150-307.110(1) (1994) provided, in part:

"(1) Qualifying Conditions. The assessor shall assess and tax publicly owned real or personal property for the real market value thereof uniformly with real property of nonexempt ownerships when the following conditions of a lease or other interest or estate less than fee simple are met. A lease or other possessory interest exists if the occupant is granted exclusive possession of a definitely described area for a specified period of time[.]

"(2) Exclusive Possession. The test is whether the occupant has sufficient control over the premises to warrant the label of possession. If the occupant can exclude others, including the owner (except for inspection, making repairs etc.) the occupant has possession. But, if the premises must be shared with others, such as a common pasture, the occupant does not have a possessory interest."

OAR 150-307.110(1) was amended in 1998. Those amendments took effect on December 31, 1998, and are not relevant here. All further references in this opinion are to the 1994 version of the rule.

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3. Sproul involved interpretation and application of ORS 307.060, a statute providing an exception to the exemption of federal property from taxation. Although the statute at issue here, ORS 307.110(1), involves an exception to the exemption of state, county, and city property, the same possessory interest principle applies under both statutes. See, e.g., Sproul, 226 Or at 406 (substantiality of occupant's interest under ORS 307.060 tested by sufficiency of control over premises to warrant label of possession); Port of Coos Bay, 298 Or at 234 (leasehold created under ORS 307.110(1) where agreement grants sufficient control over premises to constitute possession).

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Filed: June 30, 2011 IN THE SUPREME COURT OF THE STATE OF OREGON In Re: Complaint as to the Conduct of J. MARK LAWRENCE, Accused. (OSB 08-115; SC S058778) En Banc On review of the decision of a trial panel of the Disciplinary Board. Argued and submitted May 2, 2011. Paula Lawrence, McMinnville, argued and cause and filed the briefs for accused. Stacy Hankin, Assistant Disciplinary Counsel, Tigard, argued the cause and filed the brief for the Oregon State Bar. PER CURIAM The complaint is dismissed. PER CURIAM The issue in this lawyer disciplinary proceeding is whether the accused, by releasing a partial transcript of a juvenile hearing to the press, violated Rule of Professional Conduct (RPC) 8.4(a)(4), which prohibits a lawyer from engaging in conduct that is prejudicial to the administration of justice. A trial panel found the accused guilty of violating RPC 8.4(a)(4) and suspended him for 60 days. We review the decision of the trial panel de novo. ORS 9.536(2); BR 10.6. Because we conclude that

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the Bar failed to prove by clear and convincing evidence that the accused's conduct caused prejudice to the administration of justice, we dismiss the complaint. The facts are straightforward and largely undisputed. In 2007, the accused represented a juvenile male who, along with another male friend, allegedly had touched or swatted several female classmates on the buttocks and had danced in front of the females in a lascivious manner. The incident occurred at the students' middle school. After being informed of the youths' behavior, the vice principal and a police officer interviewed the victims. Based on those interviews, the accused's client and his friend were arrested by a McMinnville Police Officer on February 22, 2007. On February 23, the Yamhill County Juvenile Department filed a delinquency petition alleging that the accused's client had committed acts that, if done by an adult, would have constituted five counts of first-degree sexual abuse and five counts of third-degree sexual abuse. At an initial detention hearing that same day, the court ordered the youths to remain in custody. The events giving rise to this disciplinary action arose out of a second detention hearing held on February 27, 2007, before Judge John Collins. The accused called two of the victims to testify on behalf of his client. The female victims testified that the youths were their friends and that they did not find the youths to be threatening in any way. Regarding the alleged sexual abuse, the female victims testified that the touching or swatting was not sexual in nature but rather was mere horseplay. The victims also testified that they felt pressured by the vice principal and the police officer to make the touching sound hurtful and uncomfortable when it was not. By the second detention hearing, the case was receiving substantial media 2

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attention. Judge Collins allowed the press to attend the detention hearing, but prohibited the press from recording the proceedings. The parties dispute whether the judge prohibited only video recordings or also prohibited audio recordings.1 A number of newspaper and television stories reported the events and testimony at the hearing. After the hearing, the accused obtained a copy of the official audio recording of the hearing and had a partial transcript prepared that contained the victims' testimony. In March 2007, a reporter contacted the accused about the February 27 hearing. The reporter, who was not present at the hearing, expressed disbelief that the female victims had felt pressured by the vice principal and the police officer to make the youths' actions seem sexual. The accused offered to give the reporter a copy of the partial transcript when it was available. The accused believed that it would have been improper to give the reporter the official audio recording of the hearing but thought that the transcript could be released. The accused contacted Deborah Markham, the deputy district attorney handling the case, to see if she objected to releasing the transcript. Markham told the accused that she believed that the court would have to consent. The accused then released the transcript to the reporter without obtaining permission from Judge Collins. Deputy District Attorney Deborah Markham testified that Judge Collins prohibited video recording. Judge Collins testified that he might have prohibited the press from recording the detention hearing, but that he did not remember whether he did so or not. He did remember allowing video recording at a later hearing in the proceeding. The accused testified that Judge Collins prohibited video recording but that he could not remember if the judge prohibited audio recording.
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When Judge Collins learned that the transcript had been released -following news reports that cited the transcript -- he called a meeting with Markham and the accused and told them to release no other transcripts. The testimony from the accused, Markham, and Judge Collins differs regarding that meeting. The accused described the meeting as relaxed and said that Judge Collins had stated that the release of the transcript was permissible. Markham testified that Judge Collins was "very concerned" about the release of the transcript and that Judge Collins said that the accused's disclosure violated the law. Judge Collins testified that the accused did not get his consent to release the transcript, but that he was not sure if the accused needed to do so under the circumstances of the case, particularly given the presence of the press at the hearing. In Judge Collins's description, the meeting was not contentious; although he requested that the parties refrain from releasing any additional transcripts, he did not "feel like [he] needed to be firm" and so did not issue an order barring further releases. In April 2008, several months after the juvenile case was resolved, Tim Loewen, director of the Yamhill County Juvenile Department, reported the accused's action of releasing the transcript to the Bar. After investigating the matter, the Bar charged the accused with violating RPC 8.4(a)(4)2 by releasing to the press "information
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RPC 8.4(a) provides, in relevant part: "It is professional misconduct for a lawyer to: "* * * * * "(4) engage in conduct that is prejudicial to the administration of

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appearing in the record" of a juvenile case without court consent, in violation of ORS 419A.255(1) and (3).3 The Bar alleged that the accused had "usurped" Judge Collins's authority to control the proceeding by not seeking the court's consent before releasing the transcript, and thereby had caused prejudice to the administration of justice. In the proceeding before the trial panel, the accused argued that his release of the transcript did not violate ORS 419A.255 for each of three independent reasons: (1) the transcript that he had prepared was not a part of the record of the case and so was not subject to ORS 419A.255; (2) Judge Collins had consented to the release of the information contained in the transcript when he allowed the press to attend and report on

justice[.]"
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ORS 419A.255 provides, in relevant part:

"(1) The clerk of the court shall keep a record of each case, including therein the summons and other process, the petition and all other papers in the nature of pleadings, motions, orders of the court and other papers filed with the court, but excluding reports and other material relating to the child, ward, youth or youth offender's history and prognosis. The record of the case shall be withheld from public inspection but is open to inspection by the child, ward, youth, youth offender, parent, guardian, court appointed special advocate, surrogate or a person allowed to intervene in a proceeding involving the child, ward, youth or youth offender, and their attorneys. The attorneys are entitled to copies of the record of the case. "* * * * * "(3) Except as otherwise provided in subsection (7) of this section, no information appearing in the record of the case or in reports or other material relating to the child, ward, youth or youth offender's history or prognosis may be disclosed to any person not described in subsection (2) of this section without the consent of the court * * * ."

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the hearing; and (3) the information in the transcript could be released under ORS 419A.255(5)(b) and (d), which list certain exceptions to the confidentiality of juvenile records. Even assuming that he did violate ORS 419A.255, the accused asserted, he did not violate RPC 8.4(a)(4), because his conduct was not prejudicial to the administration of justice. That was so, according to the accused, because the defendant and the victims supported releasing the transcript and because the information contained in the transcript had already been made public as a result of the press attending and reporting on the hearing. Thus, in the accused's view, no harm -- actual or potential -- resulted from his conduct. The trial panel found by clear and convincing evidence that the accused had violated RPC 8.4(a)(4) and suspended the accused from the practice of law for 60 days. The trial panel first determined that ORS 419A.255(3) prohibited the accused from releasing the partial transcript to the press without the consent of the trial court and that the accused had violated the statute in doing so. With little discussion, the trial panel then found that the evidence that the accused had violated the statute also was sufficient to show prejudice to the administration of justice and thus that the accused had violated RPC 8.4(a)(4). The accused sought review in this court. To prove a violation of RPC 8.4(a)(4), the Bar must prove (1) that the accused lawyer's action or inaction was improper; (2) that the accused lawyer's conduct occurred during the course of a judicial proceeding; and (3) that the accused lawyer's conduct had or could have had a prejudicial effect upon the administration of justice. See In re Kluge, 335 Or 326, 345, 66 P3d 492 (2003) (citing In re Haws, 310 Or 741, 746-48, 6

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801 P2d 818 (1990)) (so stating for identically worded former DR 1-102(A)(4)). Because we find the issue to be dispositive, we begin by examining the third element -- whether the accused's conduct had or could have had a prejudicial effect on the administration of justice -- and assume, without deciding, that the accused's conduct violated ORS 419A.255(3) and otherwise satisfied the test set out in Kluge and Haws. Prejudice to the administration of justice "may arise from several acts that cause some harm or a single act that causes substantial harm to the administration of justice." Kluge, 335 Or at 345. This court has identified two components to the "administration" of justice: "1) The procedural functioning of the proceeding; and 2) the substantive interest of a party in the proceeding." Haws, 310 Or at 747. "A lawyer's conduct could have a prejudicial effect on either component or both." Id. The Bar argues that the accused's conduct, a single act, resulted in prejudice to the administration of justice because it had the potential to cause substantial harm to the procedural functioning of the court. The Bar asserts, "Substantial potential harm to the administration of justice occurs whenever a lawyer interferes in or usurps the court's ability to do its job in a proceeding pending before it." The Bar states that the accused "usurped" the court's authority by not seeking Judge Collins's consent prior to releasing the transcript. The Bar cites three disciplinary cases to support its position that the accused's conduct resulted in substantial potential harm to the administration of justice. First, in In re Eadie, 333 Or 42, 36 P3d 468 (2001), this court found a violation of former DR 1-102(A)(4) where the accused lawyer submitted a proposed order containing a 7

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misrepresentation that was intended to influence the judge in changing the trial date. Id. at 58. That conduct substantially harmed the procedural functioning of the court because it resulted in the judge acquiescing to a trial date preferred by the accused and made it necessary for the judge to resolve a dispute resulting from the accused's misrepresentation and to redraft an order. Id. Second, in In re Morris, 326 Or 493, 953 P2d 387 (1998), this court concluded that the accused lawyer had engaged in a single act of conduct that had the potential to cause substantial harm, either to the procedural functioning of the court or to the substantive interests of the parties, when she knowingly filed a notarized document that she had altered. Id. at 502-03. Third, in In re Thompson, 325 Or 467, 940 P2d 512 (1997), this court found a violation of former DR 1-102(A)(4) where the accused lawyer physically confronted a judge after receiving an adverse decision. That conduct caused substantial harm to the administration of justice because the accused's ex parte communication with the judge "unfairly attack[ed] the independence, integrity, and respect due a member of the judiciary." Id. at 475. The conduct also had the potential to cause substantial harm, because it could have influenced the judge to change her decision or to recuse herself from the case. Id. In each of the preceding cases, the accused lawyer engaged in conduct that had the potential to disrupt or to improperly influence the court's decision-making process, Thompson, 325 Or at 475; that created unnecessary work for the court, Eadie, 333 Or at 58; or that had the potential to mislead the court, Morris, 326 Or at 503. Moreover, in Eadie and Morris, the accused lawyers made knowing misrepresentations to the court. Similarly, in Kluge, the accused lawyer's conduct in knowingly filing an 8

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untimely motion to disqualify the trial judge and then failing to serve the motion on opposing counsel caused prejudice to "the procedural functioning of the judicial system by imposing a substantial burden upon both opposing counsel and [the trial judge] to undo the accused's actions." 335 Or at 346. In this case, the Bar has made no showing, as required by Kluge and Haws, that the accused's conduct harmed the procedural functioning of the judicial system, either by disrupting or improperly influencing the court's decision-making process or by creating unnecessary work or imposing a substantial burden on the court or the opposing party. Nor has the Bar shown that his conduct had the potential to result in any of the above. Certainly, Judge Collins did not testify that the accused's actions interfered with Judge Collins's conduct of the juvenile proceeding. Although the Bar correctly asserts that ORS 419A.255 gives the trial court control over the release of protected information in a juvenile record -- and, as noted, we assume without deciding that the accused acted improperly in not seeking the trial court's consent -- the Bar's theory fails to take into account the fact that the information contained in the partial transcript that the accused released was presented in open court and had already been reported by the press.4 It is difficult to see how the accused's release of the same information, in the context of this case, had the potential to cause any harm to the proceeding, much less substantial harm.

Article I, section 10, of the Oregon Constitution grants members of the public, including the press, the right to attend juvenile hearings. State ex rel Oregonian Pub. Co. v. Deiz, 289 Or 277, 284-85, 613 P2d 23 (1980).

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See Kluge, 335 Or at 345 (prejudice to the administration of justice may arise from "several acts that cause some harm or a single act that causes substantial harm"). Indeed, the Bar makes no effort to show that the accused's conduct could have resulted in new information being made public or that the release of the partial transcript itself had any potential impact on the proceeding. In fact, after the press attended the hearing and the accused released the transcript, Judge Collins allowed members of the press to listen to the official audio recording of the hearing. Nevertheless, the Bar asserts that Judge Collins was sufficiently "concerned" about the release of the information to call the accused and Markham to his chambers to discuss the incident. The fact that Judge Collins was "concerned" and met with the accused and Markham does not, by itself, demonstrate the potential for substantial harm to the procedural functioning of the court. Judge Collins himself stated that, although "in a perfect world," he probably would not have wanted the transcript released, in the context of this case and the open court provision of Article I, section 10, of the Oregon Constitution, the release of the partial transcript was likely permissible without his consent because "if [the press is] * * * going to know the information and report the information, at least get it right." Judge Collins's testimony, then, does not demonstrate that the accused's conduct impacted the procedural functioning of the court, even if the accused's conduct was cause for "concern." Nor does the Bar offer any evidence to prove that the release of the partial transcript harmed the substantive interests of the accused's client, the victims, or the state. The accused released the transcript, with the support of his client, in response to an 10

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inquiry from the media and in order to respond to inaccuracies appearing in some media reports. The accused maintained the confidentiality of the victims' names in the transcript, referring to them by their initials, consistent with an earlier order by Judge Collins. In this proceeding, the accused also submitted letters from the two victims who testified (and their parents) that stated their support for the release of the partial transcript. Finally, there was no testimony from the Yamhill County Juvenile Department that the release of the partial transcript had any effect on its substantive interests or its ability to prosecute the case. The Bar appears, instead, to take the position that virtually any violation of a statute, rule, or court order that occurs during the course of a court proceeding and relates to the conduct or any procedural aspect of that proceeding necessarily is prejudicial to the administration of justice. The Bar asserts, in effect, that "substantial potential" harm is implicit in the accused's conduct. Our cases, however, require proof by clear and convincing evidence that an accused's conduct in a specific judicial proceeding caused actual or potential harm to the administration of justice and, when only one wrongful act is charged, that actual or potential harm must be "substantial." Kluge, 335 Or at 345; Haws, 310 Or at 748. Here, the Bar's evidence did not prove that substantial harm resulted or could have resulted from the accused's conduct. We conclude that the Bar has not proved by clear and convincing evidence that the accused violated RPC 8.4(a)(4). The accused's conduct did not result in such prejudice, because there is no evidence that the release of the partial transcript, which contained solely information already presented in open court and reported by the press, 11

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harmed the procedural functioning of the judicial system. Nor is there any evidence that the substantive rights of the accused's client, the other juvenile defendant, the victims, or the state were harmed. "Prejudice to the administration of justice" requires such a showing. Haws, 310 Or at 747-48. The complaint is dismissed.

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