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2005-791-Order No. 2005-042 Recorded 6/10/2005DESCHUTES COUNTY OFFICIAL RECORDS 7005■191 REVIE NANCY BLANKENSHIP, COUNTY CLERK COMMISSIONERS' JOURNAL 06/10/2005 03;19;54 PM L GAL COUNSEL II II I IIII IIIIIIIIII I II III III 2 0 -7si BEFORE THE BOARD OF COUNTY COMMISSIONERS OF DESCHUTES COUNTY, OREGON An Order Approving a Waiver of Land Use Regulations to Authorize Pine Ridge Ranch * ORDER NO. 2005-042 Company, Inc. and E.J. and Gertrude Leason to Use the Subject Property as Allowed When They Each Acquired the Property WHEREAS, On November 2, 2004, the voters of the State of Oregon approved Ballot Measure 37 which added provisions to Oregon Revised Statutes (ORS) Chapter 197 to require, under certain circumstances, payment of just compensation to landowners if a government land use regulation reduces property value. In lieu of just compensation, Ballot Measure 37 authorizes the governing body of a local government to modify, remove or not apply the land use regulation; and WHEREAS, Pine Ridge Ranch Company, Inc. and E.J. and Gertrude Leason have made a timely demand for compensation under Measure 37, asserting that County EFU zoning regulations, restricting use of their land, have resulted in a loss of market value of the Claimants' property; and WHEREAS, section 8 of Measure 37 authorizes the Board, as the governing body responsible for adoption and enforcement of County land use regulations, in lieu of paying compensation to not apply the identified land use regulation that were enacted after a property owner acquired the property, that restricts the owner's use of that property and that reduces the value of the property; and WHEREAS, the Board has received the report and recommendation of the County Administrator as required by DCC 14.10.090; and WHEREAS, the Board has considered the Administrator's report and the evidence presented by the parties at a Board meeting as required by DCC 14.10.090; and WHEREAS, the Board makes the following findings of facts and conclusions; 1. On December 29, 2004, the County received from Pine Ridge Ranch Company, Inc. and E.J. and Gertrude Leason (collectively referred to as "Claimants") a Measure 37 claim. 2. Claimants' property is located at 69401 Goodrich Rd., Sisters, Deschutes County, Oregon. The County Administrator has recommended in lieu of payment of just compensation the following: a. with respect to the claim submitted by Pine Ridge Ranch Company, Inc. that the zoning regulations for the subject property at 69401 Goodrich Rd., Sisters, Deschutes County, Oregon that were not already in effect until after July 26, 1995, not be enforced. b. with respect to the claim submitted by E.J. and Gertrude Leason that the zoning regulations for the subject property at 69401 Goodrich Rd., Sisters, Deschutes PAGE 1 OF 3- ORDER No. 2005-042 (06/08/05) County, Oregon that were not already in effect until after October 26, 1971, not be enforced. The Administrator's report is attached and incorporated by reference into this Order as Exhibit "A." 4. The Board concurs with the Administrator's report that Pine Ridge Ranch Company is an Owner of the subject property described in Exhibit "A within the meaning of E.J. and Gertrude Leason also qualify as an Owner of the subject property within the meaning of Measure 37, having acquired it and continuously owned it since October 26, 1971. The Board concurs with the Administrator's report that the current regulation, EFU zoning, applied to the subject property, would not permit a subdivision on this subject property. The current regulation is a land use regulation which is not exempt from Measure 37 claims. 6. The Board concurs with the Administrator's report that an application for a subdivision on the subject property would be denied if the current zoning were applied. Therefore, such an application to determine enforcement of the current zoning to the Claimants' property would be futile. The regulation, EFU zoning, was not in effect at the time the Leasons acquired the property. However, such regulation was in effect at the time the Pine Ridge Ranch Company, Inc. acquired its interest in the property. 8. The Board concurs with Administrator's report that claimants have not demonstrated that domestic water, septic, and road access for the desired use on the subject property are feasible. Therefore, there is no substantial evidence that the basis for the alleged reduction in value is feasible for water, septic and road access. Despite the lack of a precise amount of reduction in value, the loss of the ability to add additional buildable lots from the subject property would be a substantial amount of reduction in fair market value if the regulations at the time the Leasons acquired the property allowed that development. THE BOARD OF COUNTY COMMISSIONERS OF DESCHUTES COUNTY, OREGON, HEREBY ORDERS as follows: Section 1. The Board hereby determines, based on these findings and conclusions and the Administrator's report in Exhibit "A," that the claim is eligible under DCC 14.10.100. Section 2. The Board hereby elects to not apply zoning and nonexempt land use regulations to the subject property described in Exhibit "B" in lieu of payment of just compensation under Ballot Measure 37. The Leasons are hereby authorized to use the subject property as permitted at the time they acquired the property. The Leasons may apply for a use of the subject property consistent with the regulations in effect at the time they acquired the property. That use shall be permitted if the use fully complies with all regulations in effect on October 26, 1971. Section 3. The Board hereby elects to not apply zoning and nonexempt land use regulations to the subject property described in Exhibit "B" in lieu of payment of just compensation under Ballot Measure 37. The Pine Ridge Ranch Company, Inc. is hereby authorized to use the subject property as permitted at the time it acquired its interest in the property. The Pine Ridge Ranch Company, Inc. may apply for a use of the subject property consistent with the regulations in effect at the time it acquired the property. That use shall be permitted if the use fully complies with all regulations in effect on July 26, 1995. PAGE 2 of 3- ORDER No. 2005-042 (06/08/05) Section 4. This Order is a waiver of a non-exempt County land use regulation from a property determined to be claim eligible as defined in DCC 14.10.020(0) Section 5. A STATE OF OREGON WAIVER MAY BE REQUIRED FOR THE DEVELOPMENT OR USE OF THE SUBJECT PROPERTY. THIS WAIVER APPLIES ONLY TO THE LOCAL REGULATIONS SPECIFIED ABOVE. DESCHUTES COUNTY LACKS THE AUTHORITY TO WAIVE ANY STATE REGULATIONS OR LAWS. STATE LAWS AND REGULATIONS MAY APPLY TO THE USE OF THE PROPERTY DESCRIBED HEREIN, AND A WAIVER OF SUCH LAWS AND REGULATIONS MUST BE SEPARATELY OBTAINED BY THE OWNERS FROM THE STATE OF OREGON. Section 6. This order does not affect any land use regulations of the State of Oregon. If the use allowed by Section 2 or Section 3, above, remains prohibited by a State of Oregon land use regulation, the Planning Director shall send notice of the Board's decision to the Director of the Department of Land Conservation and Development. The notice shall include a statement that the County will not accept an application for a building permit related to the newly allowed use on the property until the earlier of the following events: (i) notice by the Department of Land Conservation and Development that it concurs with the Board's decision, or (ii) a date 180 days from issuance of the Board's decision where no response is made to the notice by the Department of Land Conservation and Development. Section 7. This Order shall be recorded in the Deschutes County Deed Records together with portions from the deed or other instrument in Exhibits A and B sufficient to identify the subject property for recording purposes. DATED this 'r day o , 2005. ATTEST: Recording Secretary BOARD OF COUNTY COMMISSIONERS OF DESCHUTES C UNT , OREGON TOM EWOLF, Chair MICHAEL M. DALY, Co missioner r VD 6 DENNIS R. LUKE, Commissioner PAGE 3 OF 3- ORDER No. 2005-042 (06/08/05) Deschutes County Department of Administrative Services 1300 NW Wall St., Ste. 200, Bend, OR 97701-1947 (541) 388-6570 Fax (541) 385-3202 - www.deschutes.ogg TO: Board of County Commissioners From: Michael A. Maier, County Administrator RE: Measure 37 Claim - Pine Ridge Ranch Company, Inc. 69401 Goodrich Road, Sisters Introduction DATE: June 3, 2005 The County has processed the initial Measure 37 claims using its brief claim form, evaluating the initial submission, asking twice for more evidence to complete or clarify the claim, and preparing this report and recommendation under DCC 14.10, the Measure 37 ordinance. The County's claim process has been amended to recognize that less precise evidence of value may be sufficient to evaluate claims since there are currently no County funds available for payment of compensation. Also, the ordinance provides further opportunities for affected neighbors who have presented evidence and may present testimony at the Board meeting when these claims are considered. This report and recommendation is intended to be a summary and evaluation of evidence in the record. The report may be attached to the Board's Order which decides Measure 37 claims, as a factual basis for the Order. Any factual changes or additions to this report from testimony or other evidence can be part of the Board's Order. Claimants and affected parties have the opportunity to rebut this Report and provide additional relevant evidence to the Board. Also, under the County's process, claimants must provide evidence that the desired use of the property to be allowed by waiver of County regulations is feasible, i.e., not prevented by physical, utility or other development limitations of the site. Pine Ridge Ranch Company, Inc. - June 3, 2005 - Page 1 Report and Recommendation - DCC 14.10.090 This is my report and recommendation on this Measure 37 claim received December 29, 2004 when Measure 37 was in lawful effect. Claimant paid the filing fee and submitted an official County demand form. The property, shown on the attached map, is estimated to be 478 acres. The current zoning is Exclusive Farm Use (EFU) with a farm use minimum lot size. The claimant's desired use is a subdivision of the property up to 425 total lots of .33 - 1.0 acres located around a golf course. The following is an analysis of the evidence in the record on the elements of this Measure 37 claim. Current Owner - Pine Ridge Ranch Company, Inc. and E.J. and Gertrude Leason Claimants E.J. and Gertrude Leason, husband and wife, (Leasons) presented a copy of a real estate contract, recorded at Vol. 181, p. 349 of the Deschutes County deed records, showing the two as purchasers of the property. The contract is dated October 26, 1971. A warranty deed, dated November 23, 1976 and recorded at Vol. 241, p. 814, shows title vested in the Leasons. On July 26, 1995, the Leasons conveyed the subject property to Pine Ridge Ranch Company, Inc. (PPRC) by Bargain and Sale Deed recorded at Vol. 379, p. 2954 of the Deschutes County deed records. Staff has confirmed that the contract and deeds are so recorded. The claim has been presented collectively by the corporation and E.J. and Gertrude Leason. Claimants, through their attorney, who concedes that the property was conveyed to the corporation: "The transfer to the corporation does not break the chain of title which dates back to when the Leason acquired the property. They still are the true parties of interest in the property and have been since the time they acquired it in October 1971." (March 1, 2005 letter). Through their attorney, the Leasons claim an "interest" in the subject property continuously since 1971, including a "right of possession" that allegedly was retained in the 1995 conveyance to PRRC. The attorney further asserts "they have not paid rent or anything else of value to the PRRC." On June 1 the Leasons's attorney faxed a document to the County, which indicates the Leasons Pine Ridge Ranch Company, Inc. - June 3, 2005 - Page 2 retained the "economic rights for the use and development of the property, including all economic proceeds therefrom." The document indicates that it is to be effective May 15, 1995, however, the attorney has clarified that this document was executed within the last week and was submitted to demostrate the Leasons' expression of what was originally intended at the time of the original conveyance. There is no other proof that any interest in the property was retained by the Leasons at the time of transfer to the corporation. In order to properly analyze this claim it is necessary to examine the effect of Measure 37 on each property interest: the PPRC and the Leasons (husband and wife). Section (1) of the Measure refers to land use regulations which "restricts the use of private real property or any interest therein and has the effect of reducing the fair market value of the property, or any interest therein..." Section (2) provides that just compensation is based upon "the reduction in the fair market value of the affected property interest resulting from the land use regulation..." These two sections indicate the necessity of separately analyzing this claim based upon the affected ownership interest. As is pointed out later in this report, principals of corporate law do not allow the parties to casually disregard the creation of the PRRC or the transfer of the property to it in 1995. The Leasons contend that they intended the corporate form of property ownership "for estate planning purposes" and that they otherwise have treated the property in the same way they would had there been no conveyance. In other words the corporation is an "alter ego" for these individuals. The property interest held by the corporation appears from the record to be distinct from any interest that may have been retained by the Leasons following the transfer in 1995. The Leasons argue that the interest they retained when they transferred title to the corporation is sufficient for them to qualify as an Owner under subsection 11 (c) of Measure 37. They claim to own 95% of the shares in the corporation with their daughter owning the other 5%. The recently submitted document indicates that at the time of the property transfer, they intended to retain the "economic rights for the use and development of the property." The also assert that Pine Ridge Ranch Company, Inc. - June 3, 2005 - Page 3 the corporation is a "family member" under subsection 11(A). Measure 37 defines Owner as the "present owner of property or any interest therein." Assuming without deciding that a property interest, as defined by the Measure was retained by the Leasons at the time of conveyance of title to the corporation, the Leasons would still need to establish the other elements of a Measure 37 claim. The attorney for the Leasons has asserted that recently the corporation has transferred to the Leasons corporate stock representing a 1% interest in the corporation. This would represent a new acquisition date and does not alter the analysis of whether the Leasons as individuals are Owners within the meaning of the measure. The July 26, 1995 Bargain and Sale Deed does not contain any reservation of a right of possession to the Lessons. A letter from the attorney emphasizes that the Leasons' interest is a right of possession in the property. The recently received document from Leasons' attorney indicates the Leasons' intention to retain all economic and development rights in the property. This report will assume the truth of such assertion. There is no other evidence in the record that the Leasons retained such rights at the time of the transfer. Owner Date of Acquisition - July 26, 1995 The date of acquisition by the current owner is the relevant date for Board consideration of waivers under section (8) of Measure 37. The compensation section of Measure 37, section (6), uses the acquisition date of a "family member" to determine the extent of reduction in value for compensation purposes. Since the County has no funds budgeted for payment of compensation, section (8) of Measure 37 provides that in lieu of compensation, the governing body of the county may modify, remove or not apply the land use regulations to allow the owner to use the property for a use permitted at the time the owner acquired the property. The County has commonly referred to such alternative relief as a "waiver" of a land use regulation. If a waiver is granted as to County land use regulations which were adopted after an owner's acquisition date, no compensation is due, even if the prior family member held the property for Pine Ridge Ranch Company, Inc. - June 3, 2005 - Page 4 many years. While this may seem inconsistent, the measure was, evidently, written to encourage waivers of local and state land use regulations. Again, this report will analyze the distinct ownership interests of the PRRC and the Leasons. The PRRC acquired fee title to the property on July 26, 1995, the date of the recorded Bargain and Sale Deed from the Leasons. The chain of title submitted with this claim begins with a real estate contract dated October 26, 1971 and indicates the Leasons first acquired an interest in property on that date. The current ownership, the Pine Ridge Ranch Company, Inc., acquired title by Bargain and Sale Deed from the Leasons on July 26, 1995. Measure 37 section 11(A) defines "family member" as including a "legal entity owned by any one or combination of these family members." This report will assume that the PRRC is a "family member." This provision must be read in the context of section (8), which allows a government entity, such as the County, in lieu of paying compensation to "allow the owner to use the property for a use permitted at the time the owner acquired the property." Assuming that the County has enacted or enforced (non-exempt) land use regulations after 1995, which have had the effect of reducing the value of the property interest held by the PRRC, the Measure suggests the County would be liable in damages and in lieu of paying damages, may elect to not enforce such land use regulations. In other words assuming a valid claim is established, in lieu of paying compensation, the County may allow the PRRC, to use the property in a way permitted at the time the PRRC, as owner, acquired the property. Thus, any waiver granted to the PRRC would run from the corporation's acquisition date. Acquisition of title by the corporation in 1995 establishes it as a new owner for purposes of Measure 37. The fact that the Leasons continued to control the corporation does not alter the fact that title was transferred. With respect to the Leasons' property interest, these claimants must demonstrate that the County has enacted land use regulations after 1971, which have had the effect of reducing the value of their property interest, in order to qualify for either damages or waiver of land use Pine Ridge Ranch Company, Inc. - June 3, 2005 - Page 5 regulations. The evidence furnished with this claim does not distinguish between the distinct ownership interests of the corporation and the Leasons as individuals with respect to loss of property value. Restrictive Regulation - EFU zoning Under the terms of the ordinance, the claimant must identify County land use regulations that prevent the claimant from using the property in a way that he or she otherwise could have used the property at the time the property was acquired. The claimant must also show that these identified regulations cause a loss of property value. The Claimants have identified the EFU zoning as the primary land use regulation restricting the desired use. This regulation is a County land use regulation, which is subject to Measure 37 claims. The Claimants have not identified any other County land use regulations enacted after the PRRC acquisition date of 1995 which have devalued the corporation's property interest. In terms of the effect of EFU zoning on the subject property interest, it is necessary to distinguish the acquisition date of the corporation from that of the Leasons (as individuals). With respect to PRRC the EFU zoning restrictions were enacted before acquisition of title by PRRC. With respect to the Leasons the EFU zoning was enacted after the Leasons obtained their interest in 1971 and has had the effect of significantly restricting their ability to develop the property. Under County zoning in effect at that time, a subdivision might have been allowed, although not on the scale suggested by these claimants. Enforcement of County Regulation - futile DCC 14.10.040(G) Measure 37 requires that an ordinance that restricts the current owner's use be "enforced" against them. There is no evidence that any of these Claimants have applied for a land division of the property resulting in the current zoning being enforced on the subject property. Claimants have alleged that submitting an application for such a land division under current zoning would be futile. This Report confirms that such an application for the desired subdivision use of the scale submitted Pine Ridge Ranch Company, Inc. - June 3, 2005 - Page 6 with the claim would violate the current zoning and be denied. Therefore, the intent of DCC 14.10.040(G) has been met for this claim. Reduction in Value - $3.5-$5.5 million alleged in claim letter The ordinance requires that the claimant provide evidence of the amount of the claim in dollars based on the alleged reduction in the fair market value of the property resulting from the enforcement of the County's land use regulation. Focusing on the use of property conceptually proposed by the Claimants: Claimants have submitted no evidence of the reduction in value of this property by the application of the current EFU zoning or any County land use regulations. • Claimants have submitted no evidence that domestic water is available. Claimants have submitted no evidence that septic approval is feasible in the area. • Claimants have submitted no evidence about the feasibility of access from public roads and for the desired use. • Claimants have not submitted an appraisal or other evidence of a reduction in value. For purposes of analyzing PRRC's claim, again no County regulations adopted after 1995 have been asserted as devaluing PRRC's interest. While the PRRC could, as fee title owner, submit a subdivision application (of the scale suggested), the application would be subject to land use regulations in effect in 1995 (the corporate acquisition date). While an approved subdivision of 400 lots (if feasible) is arguably more valuable than a single 478-acre lot devoted to farm use, approval would require non enforcement of regulations in place when the corporation acquired title. For purposes of analyzing the Leasons' claim, certainly the County's EFU zoning was adopted after 1971. Assuming that they retained and continuously held an ownership interest and that the interest they retained at the time of transfer to the corporation included rights which Measure 37 made the subject of claims for compensation, then there would be substantial reduction in value based upon such later adopted land use regulations. Pine Ridge Ranch Company, Inc. - June 3, 2005 - Page 7 Neighbors' Evidence - Neighbors Bruce Bowen and Eva Eagle, represented by Paul Dewey, have presented letters opposing this claim. The primary point in opposition is that regulations in effect on July 26, 1995, when Pine Ridge Ranch Company acquired the property as present owner, would not allow the desired use. Attorney for Mr. Bowen and Ms. Eagle provides citations of law which indicate the following: 1. A corporation is a legal entity separate from its shareholders, directors and officers. 2. The purpose of incorporating a business is to create a separate legal and financial entity with liability in the corporation, not individuals. 3. The corporate form will not be disregarded solely because all of the stock of a corporation is owned by one person who controls the corporation. In this case, claimants have asserted that the Leasons own 95% of the corporate shares. 4. Shareholders cannot disregard the corporate entity for their selected purposes. The corporate entity must be treated with consistency. 5. Measure 37 does not change the law relating to the separate legal entity of a corporation in its definition Owner. In addition, neighbors argue that the company fails to (a) identify particular restrictive regulations, (b) provide an explanation of how restrictions reduce the fair market value of the property, (c) provide sufficient evidence of valuation for a claim, (d) identify public health and safety impacts for which regulations are exempt from the claim. Also, attorney Dewey argues that a waiver, if allowed, would have cumulative "serious negative impacts on the area" together with pending Measure 37 claims nearby. Additional information directed at the Claimant's most recent submittal was also provided to the County on June 2 and is included in the record. Effect of County Waiver - remove EFU zoning restriction Claimants have explained in their materials that a County waiver of application of the current EFU zoning would allow them to seek a subdivision of the subject property consistent with the Pine Ridge Ranch Company, Inc. - June 3, 2005 - Page 8 zoning in effect on October 26, 1971, the Leasons' date of acquisition of this property. However, the zoning in effect at that time would have allowed a subdivision of approximately 95 lots with a minimum lot size of five acres per lot. PL-2(1970). The present owner, Pine Ridge Ranch Company, Inc. acquired the property in 1995. A County waiver of the current zoning does not waive the requirement that claimant demonstrate compliance with earlier zoning in a land use application. In that land use application process, any conflicting evidence about the property acreage and qualification for a land use, including the number of allowed lots, can be resolved consistent with County land use regulations in effect in 1995. Moreover, Claimants who receive a waiver must use the current process to seek the needed development permits based on the zoning in place at the time the Owner acquired the property. Except in a rare case, the current procedural requirements for handling permits are not regulations that reduce value. Therefore, the County's procedural regulations are not waived. Conclusion and Recommendation The current owners of the subject property have submitted a claim pursuant to Measure 37 which must be analyzed separately depending upon the ownership interests: the Leasons as individuals and the corporation, as owner of fee title. While the claimants have not identified any County land use regulations adopted after 1995 which have reduced the value of the corporation's property interest, this claimant (PRRC) may submit an application for development consistent with regulations in place in 1995. My recommendation is that the Board should approve a waiver in the form of Order attached of the County's land use regulations adopted after that date. This Order would have the effect of waiving County land use regulations enacted after 1995 to allow the Pine Ridge Ranch Company, to apply for use of the property in a manner permitted at the time the PRRC acquired its interest in the property. In essence, the County would apply the zoning that was in effect at Pine Ridge Ranch Company, Inc. - June 3, 2005 - Page 9 the time PRRC acquired the property. This waiver is not a development permit. PRRC must apply for any land use under the regulations in effect on July 26, 1995. With respect to the separate interest of the Leasons, the Board should conclude that the Leasons retained both possessory, as well as economic and development rights to the property, and that they have continuously owned rights protected under Measure 37. As these economic and development rights would be devalued by virtue of County land use regulations which were adopted after the Leasons acquired their interest in the property the County should, in lieu of paying compensation, agree to not enforce County land use regulations enacted or enforced after 1971, the date they first acquired the property. Pine Ridge Ranch Company, Inc. -June 3, 2005 - Page 10 EXHIBIT B County of Deschutes, State of Oregon The South Half of the Southeast Quarter 4ShSE'4) and the South- east Quarter of the Southwest Quarter (SE-34-SW;4) of Section Thirty (30) ; the East Half of Section (31) ; the Northeast Quarter of the Northwest Quarter (NEh Wh) of Section Thirty-one (31); and a 2 acre tract' of land in the -Northwest corner of the Northwest Quarter of the Southwest Quarter (NAPWk) of Section Thirty-two (32), said tract of land to be 295 feet square. Said tract is particularly described as follows: Beginning at the 1/4 corner between Sections 31 and 32; thence East 295 feet; thence South 295 feet; thence West 295 feet-tb: the•:sectfbn"line between Sections 31 and 32; thence North 295'feet to"the place of beginning, all in Township 14,South, Range 11 East of the Willamette Meridian, in Deschutes County, Oregon. Order No. -2005-042; Lesson EXHIBIT _B_ EXHIBIT 16 County of Deschutes, State of Oregon The South Half of the Southeast Quarter .(SkSEA4-) and the South- east Quarter of the Southwest Quarter (SE-34,SW;4-) of Section Thirty (30) ; the East Half of Section (31) ; the Northeast Quarter of the Northwest Quarter (NEhNWh) of Section Thirty-one (31) ; and a 2 acre tract of land in the-Northwest corner of the Northwest Quarter of the Southwest Quarter (NW4SWh) of Section Thirty-two (32), sai tract of land to be 295 feet square. Said tract is particularly described as follows: BegInning at the 1/4 corner between Sections thence East 295 feet; thence South 295 feet; thence 31 and 32; West 295 feet-tb the-sec.tibn"line between sections 31 and 32; thence North 295'feet to-the place of beginning, all in Township 14,South, Range 11 East of the Willamette Meridian, in Deschutes County, Oregon. 7 5, 4. STATE OF OREGON County of Deschutes I hereby certify that the within instru- rneint of writing was rece ved for Record the_.3 / day ofA.D. 192/ at_ wff clock 10 M., and recorded in Book on Page .12a Recox of ROSEMARY PATTER SON County Clerk By D~DVtq. G