2007-369-Order No. 2007-059 Recorded 3/26/2007COUNTY
NANCYUBLANKENSHIP,F000NTY CLERKS 1►d ~~~7.3fi9
COMMISSIONERS' JOURNAL 03/1611007 08;49;14 AM
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2007-360
Do not remove this page from original document.
Deschutes County Clerk
Certificate Page
If this instrument is being re-recorded, please complete the following
statement, in accordance with ORS 205.244:
Re-recorded to correct [give reason]
previously recorded in Book
or as Fee Number
and Page
REVIE DESCHUTES COUNTY OFFICIAL
COUNTY CLERKDS 2007017215
LEGAL COUNSEL
11111111111111111111111111111111111111111111111 NO FEE
0053719220070017215018 182
031231100103:36:43 PM
D-H37 Cntol Stn=23 PO
This is a no fee document
BEFORE THE BOARD OF COUNTY COMMISSIONERS OF DESCHUTES COUNTY, OREGON
An Order Determining Whether to Authorize a
Waiver of Land Use Regulations for LPP * ORDER NO. 2007-059
Resources Limited Partnership to Use the Subject
Property as Allowed When It 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, LPP Resources LP ("Claimant") made a timely demand for compensation under Measure
37 for a reduction in value to property at 22200 Paulina Lake Rd., La Pine, Oregon due to regulations which
took effect after it or a family member acquired this property, and
WHEREAS, Section 8 of Measure 37 authorizes the Board, as the governing body responsible for
adoption and enforcement of County regulations, to not apply identified land use regulations that restrict the
owner's use and reduces the value of the property in lieu of payment of compensation; 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;
On November 16, 2006, LPP Resources LP (LPP) filed a Measure 37 claim with the
Community Development Department.
2. The property address is 22200 Paulina Lake Rd., La Pine, Oregon and is within Deschutes
County. More specifically, the property is described on Exhibit B, attached to this Order.
3. The County Administrator has recommended that the zoning regulations for the subject property
that were adopted in 1988 and prior thereto continue to be enforced unless a reviewing court
determines Claimant to have established an interest in the property prior to 1988, based upon its
having been merged with La Pine Pumice Company, in which case and in lieu of payment of
just compensation, certain regulations, dating back to 1980 or 1969, depending on the
sufficiency of its interest in property, would 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 the current land use regulations, Open
Space and Conservation (OS&C), if applied to the subject property, would not permit mining,
PAGE 1 of 3- ORDER No. 2007-059 (03/13/07)
residential development or geothermal power development on the subject property. The current
regulation is a land use regulation which is not exempt from Measure 37 claims. Therefore, an
application to determine applicability of current zoning to Claimant's property would be futile.
THE BOARD OF COUNTY COMMISSIONERS OF DESCHUTES COUNTY, OREGON, HEREBY
ORDERS as follows:
Section 1. The Board hereby determines, based on these findings, conclusions, and the Administrator's
report in Exhibit "A," that the claim may be eligible under DCC 14.10.100.
Section 2. The Board hereby determines as follows:
Claimant is the current owner of the property described in Exhibit "B." Prior to Claimant acquiring
the Property, title thereto was held by La Pine Pumice Company since 1980. La Pine Pumice
Company acquired an interest in the Property in 1969 by virtue of a Lease and Option to an
unpatented mining claim over the Property, title to which was until 1980 held by the United States.
Claimant's ownership is based upon acquiring an interest in the Property in 1988 by virtue of a
merger with La Pine Pumice Company. At that time Claimant succeeded to La Pine Pumice
Company's then existing rights and obligations, including title to the Property. In 1988 La Pine
Pumice transferred its interest in the subject property to Claimant and voluntarily dissolved as a
corporate entity. Prior to its dissolution in 1988 La Pine Pumice Company held no rights pursuant to
Measure 37 and thus was in no position to transfer any such interests to Claimant.
Measure 37 contains a definition of "family member" which includes natural persons, as well as
corporate entities owned or controlled by natural persons. The definition of "family member" does
not expressly include corporate entities wholly owned by corporate entities. It appears that La Pine
Pumice Company is not a "family member" of Claimant. However, the principal controlling
interests were the same people for both LaPine Pumice Company and for Claimant. If a reviewing
court should interpret the definition of "family member" to include corporate entities that are
formed by other corporate entities, then La Pine Pumice Company is a related family member to
Claimant.
4. County land use regulations which were adopted after La Pine Pumice Company first acquired an
interest in the property included zoning and other restrictions, in particular PL-15 and Open Space
and Conservation. Such regulations were adopted before La Pine Pumice Company acquired title to
the property, but after LaPine Pumice acquired an interest in the property. Such regulations prohibit
the owner from engaging in mining, residential development and geothermal power development
and reduce the value of the property.
Subject to paragraph 6 of this Section 2, the Director of Community Development is authorized to
determine, based upon any complete development or land use application(s) submitted by or on
behalf of Claimant, and to not apply any nonexempt county land use regulations which were first
adopted after Claimant's acquisition date of December 1988.
If a reviewing court should decide that despite La Pine Pumice Company's transfer of the property
by operation of law (merger) and dissolution, that Claimant enjoys the same rights which La Pine
Pumice Company would enjoy, if it continued to exist and own the Property, then Claimant's
acquisition date for determining applicable county land use regulations would be the acquisition
date of La Pine Pumice Company. That acquisition date is either 1980, the date that La Pine Pumice
acquired title to the property, or, if a court determines it be a sufficient ownership interest under
Measure 37, 1969, the date that La Pine Pumice Company obtained a Lease and Option to the
PAGE 2 of 3- ORDER No. 2007-059 (03/13/07)
subject Property. This also assumes that a reviewing Court would conclude that LaPine Pumice
Company and Claimant are "family members" as defined by Measure 37.
Section 3. To the extent that any law, order, deed, agreement or other legally enforceable public or
private requirement provides that the subject property may not be used without a permit, license, or other form
of authorization or consent, this order does not authorize the use of the subject property unless the Claimants
first obtain that permit, license, or other form of authorization or consent.
Section 4. A STATE OF OREGON WAIVER MAY BE REQUIRED FOR THE DEVELOPMENT OR
USE OF THE SUBJECT PROPERTY. ALTHOUGH THE COUNTY WILL ACCEPT AND PROCESS
SUBSEQUENT LAND USE APPLICATIONS ASSOCIATED WITH THE SUBJECT PROPERTY,
APPROVAL MAY NOT BE GRANTED WITHOUT A VALID WAIVER FROM THE STATE PERTAINING
TO STATE REGULATIONS WHICH WOULD OTHERWISE PRECLUDE THE PROPOSED LAND USE.
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 5. 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 thisl 3 - day of March, 2007.
BOARD OF COUNTY COMMISSIONERS
OF DESCHUTES COUNTY, OREGON
DALY,
ATTEST:
TAMMT93A1EY, COlYIASSIONER
I V
Recording Secretary D NNIS R. LUK , COMMISSIONER
PAGE 3 OF 3- ORDER No. 2007-059 (03/13/07)
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.ora
TO: Board of County Commissioners
From: David Kanner, County Administrator
RE: Measure 37 Claim - LPP Resources Limited Partnership
(Claimant)
22200 Paulina Lake Rd. La Pine, OR
Introduction
DATE: March 13, 2007
The County processed the initial Measure 37 claims using its brief claim form, evaluating the submission,
and preparing this report and recommendation under DCC 14.10, the Measure 37 ordinance. The
County's claims process recognizes 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 to present evidence and testimony at the
Board meeting when these claims are considered.
This report and recommendation are intended as 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 made
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, which may be allowed by a waiver of County
regulations, is feasible, i.e., not prevented by physical, utility or other development limitations of the site.
Report and Recommendation - DCC 14.10.090
This is my report and recommendation on this Measure 37 claim received on November 16, 2006, when
Measure 37 was in lawful effect. Claimant LPP Resources, Limited Partnership (herein "LPP"), has paid
the filing fee and submitted the County's official demand form. The property, described on the attached
exhibit, consists of a single tax lot with approximately 157 acres. The current zoning is Open Space and
Page 1 of 14 - Exhibit A - Order No. 2007-059
Conservation (OS&C). The Claimant's desired use is pumice aggregate mining, a residential subdivision
and the ability to produce geothermal power. Claimant alleges a reduction in value of approximately
$203,500,000 due to the inability to develop the property as desired. The following is an analysis of the
evidence in the record on the elements of this Measure 37 claim.
Current Owner - A title report submitted in support of this application and County records indicate that
title to the property is currently held by LPP Resources Limited Partnership. LPP was formed in
December 1988 by James Miller and Frederick Weber, Jr., as general partners, and LaPine Pumice Co.,
as limited partner, the latter of which was formed by James Miller, William Murray and Helen Gossett in
1969.
Claimant's attorney submitted documentation showing LaPine Pumice Company contributed the
subject property to LPP in exchange for partnership interests. County deed records include a special
warranty deed transferring title to the property from LaPine Pumice Company to LPP Resources LP in
December 1988. According to Claimant's documentation, La Pine Pumice Company was dissolved in
1988 and corporate shareholders exchanged their stock for partnership units in the formed limited
partnership.
County deed records indicate the property was the subject of a Mineral Patent, dated July 3, 1980
and granted by the United States to Clare Williamson. Clare Williamson conveyed her interest in the
property by bargain and sale deed to La Pine Pumice Company on October 31, 1980. When a bargain
and sale deed is used to convey property, it does not include any warranty that the grantor is conveying
fee title. Rather, this form of deed conveys whatever interest in the property the grantor had or may later
acquire, which in this case was a mineral patent. US Government records concerning the original placer
mining claim, demonstrate that Clare Williamson had an unpatented placer mining claim from prior to
1969 until July 1980. Provided the claim was located and recorded in compliance with federal and state
law, until a patent is issued, a claimant (for a mining claim) has a possessory interest in the federal land
for purposes of mineral development. Unless the claim is successfully challenged, upon application from
the claimant, a federal patent would issue. Once a patent is issued by the federal government the grantee
obtains fee ownership in the property. Thus, at some unknown time Clare Williamson had a possessory
interest in the property which was owned by the US Government. This possessory interest was converted
to fee title in 1980 by virtue of the federal patent.
Page 2 of 14 - Exhibit A - Order No. 2007-059
Staff has uncovered an undated article from the Bend Bulletin that discusses the subject property and
three others, which were the subject of a dispute brought by the US Forest Service over the validity of the
mining claims. According to the article, Ms. Williamson was unsuccessful in establishing the validity of
her claims to three parcels, but was successful as to the fourth, the subject parcel. As noted, the U. S.
Government conveyed this parcel by patent to Ms. Williamson in 1980, and she in turn conveyed her
interest to the LaPine Pumice Company. This corporation in 1988 transferred title to LPP.
Claimant asserts that the subject property interest originated with a Lease and Option between
Clare Williamson and La Pine Pumice Company, dated 1969 in a mineral placer claim over property
owned by the US Government. Claimant has submitted a copy thereof, together with unrecorded
Amendments Nos. 1 and 2 to Lease and Option, dated November 6, 1973 and April 27, 1979,
respectively, from Clare Williamson to La Pine Pumice Company.
Measure 37 defines "owner" very broadly as the owner of property or any interest therein. In this
case, Claimant asserts an interest in property dating from before a federal patent was issued. So the
County must determine whether Measure 37 was intended to recognize as an interest in property, mere
possessory interests, or, as in this case a Lease and Option. This report will also discuss whether the
current claimant can assert an earlier acquisition date.
La Pine Pumice Company's interest was, at best a lease and option in a mining claim, which is a
possessory interest that did not ripen to fee interest until a patent was issued by the US government to
Clare Williamson in 1980 and which required exercise of the purchase option, which occurred in October
of 1980.
An acquisition date of 1969 depends upon several facts, which Claimant has attempted to
establish. First, 1969 was the date on which La Pine Pumice Company acquired a Lease and Option to
an unpatented mining claim to the subject property. Clare Williamson held the claim and was entitled to
mine ore on the property. The Lease and Option would have entitled the lessee, La Pine Pumice
Company to mine ore, as well. In the event the holder of the mining claim succeeded in obtaining a
patent, the lessee/optionee would be entitled to acquire the patent. In this case Clare Williamson was the
holder of the mining claim and negotiated the Lease and Option to La Pine Pumice Company. After a
patent to the subject property was issued to Clare Williamson, La Pine Pumice Company excercised its
Page 3 of 14 - Exhibit A - Order No. 2007-059
option and acquired title to the property. One may conclude that while it was certainly less than fee title,
La Pine Pumice Company had an interest in the subject property since 1969.
A separate issue concerns whether LPP, the claimant, can rely on the earlier acquisition date of
La Pine Pumice Company and thus avoid application of county regulations that were enacted between
1969 and 1988. LPP asserts that its interest in the property was the subject of a merger pursuant to ORS
60.481, which allows one or more business entities to merge "into a corporation." The statute also allows
a corporation "organized under this chapter" to be merged into a business entity organized under the laws
of this state.
There are several problems with this assertion. First, the text of the statute as it existed in 1988
states: "One or more corporations may merge into another corporation..." Nothing in this statute permits
the merger of a corporation into a limited partnership. Indeed even under the current version, this statute
authorizes one or more business entities, including a partnership, to merge into a corporation, not the
reverse. Second, the current version of this statute allows a "corporation organized under this chapter" to
merge into another business entity organized under the laws of this state. It is unlikely that La Pine
Pumice Company was "organized under this chapter," since ORS chapter 60 was first enacted in 1987,
while La Pine Pumice Company had been established at least as early as 1969 and therefore cannot rely
on such provision.
LPP further asserts the effect of a merger on property held by the corporation by reference to the
current version of ORS 60.497. The version as it existed in 1987 reads quite differently. At that time the
section read: 'When a merger takes effect: (a) every other corporation party to the merger merges into
the surviving corporation and the separate existence of every corporation except the surviving corporation
ceases; (b) the title to all real estate and other property owned by each corporation party to the merger is
vested in the surviving corporation without reservation or impairment...." Thus, the statute does not assist
LPP. So, as a technical matter, a statutory merger may not have been accomplished.
While the record demonstrates that LPP acquired the property by deed in 1988, well after various
County land use regulations were enacted, LPP asserts that merger law preserves the 1969 acquisition
date of La Pine Pumice Company and thus allows LPP's claim date to reach back before such adverse
land use laws. The reasoning: La Pine Pumice Company and LPP are really the same company.
According to LPP, the axiom that merger compels continuity of business and identity also renders the
Page 4 of 14 - Exhibit A - Order No. 2007-059
intervening "acquisition" by LPP a mere fiction. This assertion requires a more fundamental discussion of
the law of merger.
ORS 57.480 (the predecessor to 60.481) expressed the legislative intent that a surviving
corporation to a merger should acquire by operation of law all the interests of the merging corporations
and that those interests should not in any way be impaired by the merger. Nike, Inc. v. Spencer, 75
Or.App. 362, 372 (1985). The Oregon appellate court in Nike was persuaded by a New York appellate
case, which was quoted as instructive: "upon merger the surviving corporation 'shall acquire and
become possessed of the estate, property, rights, privileges and franchises of such [merged]
corporations, and they shall vest and be held and enjoy it without change or diminution."'
Until the enactment of merger laws in May 1905, Oregon corporations did not have the power to
merge. Prior to May 1905, a corporation could, of course, sell pieces of its assets and rights without
unanimous shareholder consent. Bereft of rights to merge or consolidate, corporate opportunity and
commerce were unduly impeded. Oregon, along with all other jurisdictions, enacted merger laws and
thereby facilitated the flow and movement of corporate assets. But breaking the dam necessitated
installing protections: protections for shareholders, creditors, and the public. ORS 57.480 was devised to
protect creditors and the public whilst also assuring merged corporations that the value of the acquired
assets transferred without impairment. ORS 57.480 was repealed and replaced by ORS 60.481 in 1987.
And so the concept of continuity was born. Shares in the disappearing corporation are cancelled
and shares in the merged corporation (or partnership units) are distributed in their stead; the selling
corporation ceases to exist; and, rights and liabilities flow from the disappearing corporation into the
survivor. The separate existence of every business entity other than the survivor ceases and their
identities are instead merged into and continue in the surviving entity. This principle of continuity extends
to title to property, contract rights, and claims of creditors. In fact, the singular purpose and effect of the
principle of continuity is the preservation and continuance of prior rights and liabilities.
LPP misconstrues and erroneously expands the principle of continuity. Contrary to LPP's beliefs,
companies which disappear into a merger cannot, post-merger, acquire rights relative to the properties
transferred for the benefit of the surviving company to assert. In essence, LPP argues that: As a matter
of law, La Pine Pumice Company has continued to separately exist after the 1988 acquisition, therefore
La Pine Pumice Company, as a separately existing entity, has the continuing power to acquire rights of
Page 5 of 14 - Exhibit A - Order No. 2007-059
action and assert claims, including M37 relief, therefore LPP, as survivor, may prosecute rights of action
held by La Pine Pumice Company, including M37 claims.
Each link in LPP's chain of reasoning requires separate analysis.
Firstly, does La Pine Pumice Company continue to separately exist after the 1988 acquisition? A
corporation, as a creature of statute, does not cease to exist unless dissolved: "Even though all property
and liabilities of a corporation may be transferred in a practical merger, the existence of the transferor
corporation is not thereby terminated. It continues to exist until dissolution proceedings are taken."' In
this case, according to records on file with the Oregon Secretary of State, La Pine Pumice was dissolved
on December 28, 1988.
Secondly, if La Pine Pumice Company continues to exist, does it also have continuing power to
acquire and prosecute rights of action, including claims for relief under M37? For real property owned and
now held by La Pine Pumice, La Pine Pumice may bring claims to M37 relief arising out of adverse land
use laws enacted or enforced during its ownership. So long as La Pine Pumice is the present owner of
the impacted property, it has standing to assert a M37 claim. The pivotal element: La Pine Pumice must
be the present owner of the impacted property. Satisfying this element of the statutory relief begs the
question: what real property does La Pine Pumice presently own? LPP does not allege that La Pine
Pumice presently owns real property. Rather, LPP's claim is grounded on interests in property transferred
in November 1988 by automatic application of a statutory merger and later deeded by La Pine Pumice to
LPP. Merger laws effect an automatic transfer of title to real property from the corporation (La Pine
Pumice Corporation) to the survivor (LPP Resources) once the conditions for merger have been met. The
validity of the acquisition and transfer is recognized and insisted upon by operation of law.
Surviving corporations succeed to the then-existing rights of the selling entity. Simple enough.
The same principle of continuity that divested La Pine Pumice of any rights in property it transferred also
vested in LPP whatever title or interests in property La Pine Pumice held prior to the merger. The assets,
rights, property interests acquired neither revert nor are in any way impaired; the transfer happens without
change or diminution to the rights.
What pre-existing claims, rights, and interests vis-a-vis the real property were held by La Pine
Pumice as of the merger date? An examination of title dated November 1988 probably reveals a laundry
1 Corporate Combinations: Mergers, Consolidations, Asset and Stock Purchases, Alfred H. Stoloff, 45 Or. Law Rev. 161, 172
(1966)
Page 6 of 14 - Exhibit A - Order No. 2007-059
list of interests or rights buried in the real property. There may have been licenses, permits, easements,
leases, and other rights that benefited the land or La Pine Pumice as owner. Taxes, liens, or other
liabilities may have been recorded against the real property. The merger documents themselves include a
list of outstanding liabilities.
What about Measure 37 rights? LPP presently owns the property but did not when the adverse
land use laws were enacted; La Pine Pumice was the prior owner when the adverse land use laws were
enacted but transferred the property to Claimant before M37 was adopted. As La Pine Pumice stood in
1988, there were no rights for relief available under M37. LPP can only stand in the place La Pine
Pumice stood at the time of merger: rights transferred cannot be impaired, do not revert, and do not
change. Denial of LPP's claim of an early Measure 37 acquisition date cannot impair rights that never
transferred. Neither does rejection effect a reversion of transferred rights to La Pine Pumice: no rights of
action to M37 ever transferred in November 1988 that would revert. Standing in the shoes of La Pine
Pumice means laws enacted post merger cannot be retroactively applied to create transferable rights or
liabilities where none existed prior to the merger. Continuity theory does not reopen time itself, reach
back to the moment rights were transferred by La Pine Pumice and apply post-merger laws so as to
create transferable claims where no such laws and rights previously existed in 1988.
A more recent Oregon Supreme Court case seems to recognize the principal that the law in effect
prior to the time of the merger will be applied to legal proceedings initiated by a successor corporation. In
Pacific First Bank v The New Morgan Park Corp., 319 Or 342, (1994) a tenant (Bank) proposed to merge
into a subsidiary. The lease provided that any assignment or transfer, even by operation of law, was
subject to the landlord's approval. The merger went forward without the landlord's approval and the
landlord declared the tenant in breach of the lease. The Court decided that the merger effected a transfer
within the meaning of the lease and therefore was subject to the lease provisions requiring the landlord's
prior approval. The Court also announced what in 1994 would be a new legal principal requiring that a
landlord in deciding whether to approve a lease assignment was under a duty to act in good faith.
However, the Court also announced that this new legal principal was not in effect at the time the lease
originated (1982). At that time a Landlord was not under a duty to act in good faith in considering whether
to approve a lease assignment. In other words, the Court would not retroactively apply a recently
announced legal principal that was not in effect at the time the lease was entered. Again, the surviving
Page 7 of 14 - Exhibit A - Order No. 2007-059
(merged) tenant could not claim entitlement to a recently announced legal principal requiring the landlord
to act in good faith, when that was not a legal requirement at the time the lease was entered. As the Court
explained:
Bank asserts that its reasonable expectations also included the law that was applicable at
the time the lease agreement was made and that that law itself imposed a duty of good faith.
There are two flaws in that reasoning. First, with respect to leases, the applicable law at the time
the lease agreement was signed (1982) was stated in Abrahamson v. Brett, supra, 143 Or at 22:
when a lease prohibits assignment without the landlord's consent, the landlord "may arbitrarily
withhold [its consent] without giving any reasons, and in granting [its consent] may impose such
conditions as [it] sees fit." As stated above, we are announcing a different principle today: that a
duty of good faith applies to lease agreements as it does to other contracts. Second, also as
discussed above, the duty of good faith operates to effectuate the reasonable expectations of the
parties as determined under the terms of their contract. Here, those terms demonstrate that the
parties agreed to that is, reasonably expected a unilateral, unrestricted exercise of
discretion by Landlord under Section 18.2 of the lease agreement.
In summary, Tenant's merger with its wholly owned subsidiary effected a transfer "by
operation of law" of the lease, requiring Landlord's consent. Landlord's refusal to consent did not
contravene the "reasonable expectations" of the parties as to Landlord's right to withhold that
consent, as those expectations were manifested in the express terms of Article 18 of the lease
agreement. Bank is not entitled, therefore, to a declaration that it became the tenant of the
property in compliance with the lease agreement.
Thus, LPP Resources is in no position to assert M37 rights that La Pine Pumice Corporation
never possessed in 1988, when the merger took place, but only those rights and liabilities that La Pine
Pumice could have asserted at that time. Thereafter La Pine Pumice dissolved; it did not continue to exist
in some altered or mutated state.
Owner Date of Acquisition -
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. Since the County
has no funds budgeted for payment of compensation, waivers that are issued by the County are limited
by section (8) of Measure 37 to County land use regulations that were adopted after the later acquisition
date of the current owner. If a waiver is granted as to County land use regulations which were adopted
after the current owner's acquisition date, no compensation is due, even if the prior family member held
the property for many years. While this may seem inconsistent, the measure was, evidently, written to
encourage waivers of local and state land use regulations.
The documentation concerning Claimant's interest in the subject property consists of the following:
Page 8 of 14 - Exhibit A - Order No. 2007-059
• Lease and Option between Claire Williamson and LaPine Pumice Company, dated May 7, 1969.
• Amendment No.1 to Lease and Option, dated 1973 between Clare Williamson and LaPine
Pumice Company.
• Amendment No. 2 to Lease and Option, dated 1979 between Clare Williamson and LaPine
Pumice Company.
• Mineral Patent from US Government to Clare Williamson, dated, July 3, 1980. Prior to this date,
no recorded documents have been submitted.
• Bargain and Sale Deed from Clare Williamson to La Pine Pumice Company, dated October 31,
1980.
• Special Warranty Deed from LaPine Pumice Company to LPP Resources, limited partnership
dated December 27, 1988.
• As discussed previously, LPP's interest arose by operation of law in November 1988 with the
merger. This was later confirmed by deed in December 1988.
• La Pine Pumice Corporation voluntarily dissolved on December 27, 1988.
• Corrected Special Warranty Deed, dated January 24, 1989 from LaPine Pumice Company to LPP
Resources, limited partnership.
The definition of "family member" within the Measure includes natural persons, as well as creatures of
statute, like corporations and partnerships owned by natural persons. In this case, LaPine Pumice
Company was formed by the same natural persons that later formed LPP. A question exists as to
whether LaPine Pumice is a family member of LPP. When family member ties are not present, Measure
37 looks to restrictive land use regulations as they pertain to the current owner only, not a previous
unrelated owner.
Restrictive Regulation - OS & C
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, and thus reduce the value of the claimant's property.
Claimant has identified PL-5, the first zoning ordinance, adopted in 1971, and which Claimant
correctly notes, did not apply to the subject property, as it was not identified on the County's first zoning
map. Later the County by Board Order, dated June 20, 1973 and recorded at Vol 17, page 98, amended
Page 9 of 14 - Exhibit A - Order No. 2007-059
the zoning map to zone "all of the private land not presently zoned lying within the Deschutes National
Forest boundaries in Deschutes County" as "A-1-T, Exclusive Agricultural with Transitional Standards."
Those standards restricted development of private land located within the Deschutes National Forest to
Planned Unit Development with a minimum parcel size of 40 acres. Claimant asserts that this was an
agricultural zone and that it would have allowed single family dwellings in subdivisions with 5-acre
minimum lots sizes, or as small as 2 % acres if a Class II subdivision. Claimant then asserts that such
regulations would not have applied to an interest in property established in 1969 and thus one-acre lots
(limited by soil permeability for septic) would have been approved. The effect of the County's 1973 Order
is unclear. First, staff has not been able to locate any map with which it might have been associated.
However, more significantly, the Order by its terms was limited to private property located within federal
land and thus, might not have applied to the subject property, since title was then held by the US
Government. Thus, it appears that despite claimant's possessory interest for mining purposes, since the
property was still owned by the Federal government, it may not have been subject to county zoning under
PL-5 or the Board Order of June 20, 1973. Whether Measure 37 and its expansive definition of "owner'
would change this result is an open question. In other words, since La Pine Pumice Company had an
interest in the property by virtue of the Lease and Option over the unpatented mining claim, it is possible
that the Board's order imposing a new zoning classification could be construed as applying to it, even
though title was still held by the United States. Still, the application of the 1973 Order would have
occurred after LaPine Pumice acquired an "interest" in the property, but before it acquired title.
Claimant also discusses PL-15, the County's 1979 zoning ordinance, which included adoption of
a new zoning map, adopted on November 1, 1979. Claimant asserts that the subject property was not
identified on the 1979 zoning map and thus continued its Forest Al-40 designation, which, according to
Claimant, would still have allowed one-acre single family residential dwellings as under the 1971 zoning
ordinance. This is incorrect. The County actually adopted zoning maps to implement PL-15 on November
1, 1979. The 1979 zoning map, #31A, established the Open Space and Conservation (OS&C) zone over
the subject property. Such designation would have restricted development of the property for residential
purposes, although without a development application, the County is not prepared to assess by how
much. PL-15 contained provisions which might have allowed an applicant to demonstrate that a use
lawfully existing prior to adoption, should qualify as a nonconforming use and thus be permitted to
Page 10 of 14 - Exhibit A - Order No. 2007-059
continue. While a person might establish a legal preexisting use as nonconforming, the 1979 zoning
ordinance substantially limited development activities on the subject property.
Measure 37 exempts regulations which were enacted prior to the acquisition date of the owner or
a family member of the owner. The definition of family member includes a "legal entity owned by any one
or combination of these family members." Since the series of family members in this definition is limited to
the traditional members, i.e., father, mother, sister, brother, etc., it is unclear whether one business entity,
can be a family member of a different business entity. In other words, for purposes of relating back to
regulations adopted while a family member held the property, it is unclear whether Claimant, LPP, can
claim La Pine Pumice Company was a "family member." We assume that two legal entities that are each
in turn controlled by the same individual persons satisfies this requirement, but the definition is not clear.
Certainly, this assumption is not intended as disregarding or altering the conclusions stated
above relative to the transfer between La Pine Pumice and LPP.
Enforcement of County Regulation - futile DCC 14.10.040(G).
Measure 37 requires that an ordinance which restricts the current owner's use be "enforced"
against them. Claimant has not demonstrated that submitting an application for mining, subdivision, and
geothermal development would be futile. More specifically, Claimant has not demonstrated that under the
terms of the 1979 zoning ordinance, surface mining of the property, other than maintenance or
continuation of a non-conforming use, would be prohibited. (See: ESEE Findings and Decision for
Surface Mining Site No. 433). This Report confirms that an application for a residential subdivision or a
geothermal power generation facility 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 - $203,500,000 alleged on Claim Form
The ordinance requires that the Claimant provide evidence of the amount of the claim in alleged reduction
in the fair market value of the Claimant's property resulting from the enforcement of the County's land use
regulation.
All that La Pine Pumice could do prior to acquiring title was to mine pumice. As a result of the
County's 1979 zoning ordinance, the establishment of the OS&C zoning and its rendering La Pine
Pumice's mining use nonconforming, It could no longer mine pumice in an unrestricted way. Thus La Pine
Pumice's ability to mine was substantially restricted and the value of such interest although not precisely
Page 11 of 14 - Exhibit A - Order No. 2007-059
established, would have been negatively affected. Such land use regulation would have also applied to
LPP, as successor.
LPP has also asserted that its interest in the property has been diminished based upon its
inability to legally develop the property as a residential subdivision. In terms of evidence of diminished
value for residential development, Claimant has submitted no evidence that domestic water is available or
that sanitary service is or would be feasible. Claimant has not submitted an appraisal. Nor is there
evidence of the diminution of value from just before and just after adoption of the county's restrictive land
use regulations. Rather, the evidence as to the diminution in value consists of a calculation based upon
the property's current FMV prepared by the County Assessor, divided by 157 acres and multiplied by
$80,000 per lot, as if 157 units could be placed on that many acres. Claimant offers no evidence to
support the assumed price per lot. As this property is located within the Newberry National Volcanic
Monument at an approximate elevation of 6500 feet, access, if available at all, and particularly in the
winter would likely make any home sites available only for seasonal use. Since the slopes of the caldera
are quite steep, adequate stability for home sites might not enable the numbers of home sites Claimant
desires. Finally, access across federal land for such use would need to be established.
Claimant's alleged reduction in value appears to be based upon the assumption that lots created
by subdividing the property are fully marketable and useable by others for development. Referring to a
recent Opinion of the Oregon Attorney General, rights obtained under Measure 37 are personal to the
present property owner. Assuming an owner, having obtained the necessary "waivers" from the County
and the State, could subdivide the property, future owners would, according to the Attorney General, be
precluded from using the property in a manner inconsistent with land use regulations in effect at the time
of the transfer. Thus, the amount of reduction in value asserted by the Claimant may be unreliable, if the
resulting lots are unusable by future owners, based on their having to comply with zoning regulations in
place when such future owners acquire the property.
Claimant has asserted that its interest in the property has also been diminished based upon its
inability to legally develop a geothermal power plant. Again, assuming that Claimant's related family
member, La Pine Pumice Company, had a Measure 37 "interest" in property and could have legally
developed a geothermal plant based upon the 1969 Lease and Option over an unpatented mining claim,
that County zoning regulations adopted after that date prevent such use, and that Claimant's interest in
Page 12 of 14 - Exhibit A - Order No. 2007-059
the property is coextensive with La Pine Pumice Company after the merger, then the value of the property
has been diminished by County land use regulations.
Effect of County Waiver - Measure 37 clearly allows the County to waive its non exempt land use
regulations only back to the date the current owners, not family members, acquired the property:
"(8) Notwithstanding any other state statute or the availability of funds under
subsection (10) of this act, in lieu of payment of just compensation under this act,
the governing body responsible for enacting the land use regulation may modify,
remove, or not to apply the land use regulation or land use regulations to allow
the property owner to use the property for a use permitted at the time the owner
acquired the property." (emphasis added)
11(c) "Owner" is the present owner of the property, or any interest therein. "
In this case, LPP has presented a case showing what it believes to be a continuous interest in the
property since 1969. This interest is based upon numerous assumptions about how Measure 37 is to be
interpreted and that the merger of La Pine Pumice into LPP Resources did not amount to a transfer.
Unless these assumptions are correct, however, the County believes that Claimant is at best entitled to a
waiver of land use regulations that were adopted after 1988, the date Claimant acquired an interest in the
property under Measure 37.
Conclusion and Recommendation
Claimant's interest is traceable to a corporation with which it merged in 1988. The corporation's
interest for Measure 37 purposes arose from a Lease and Option over an unpatented mining claim which
was obtained in 1969. County land use regulations adopted after 1969 severely restricted the ability to
use the property as allowed in 1969, for mining purposes. The corporation obtained fee title in 1980, but
this occurred after zoning regulations further limited the ability to develop the property for residential
purposes. Assuming the corporation qualifies as a "family member" of the Claimant for Measure 37
purposes, then Claimant has established diminution in value due to county land use regulations.
However, while Claimant is a successor in interest to the La Pine Pumice Corporation, the latter ceased
to exist in 1988, well before Measure 37 rights existed. Therefore Claimant is entitled to an acquisition
date no earlier than December 27, 1988.
Page 13 of 14 - Exhibit A - Order No. 2007-059
My recommendation is that the Board approve a waiver in the form of Order attached. This Order
would have the effect of granting a waiver of County land use regulations unless a reviewing court should
determine that by virtue of the merger in 1988 Claimant is entitled to claim the earlier 1969 acquisition
date that only La Pine Pumice Company could assert today, if it were the property owner.
Cautionary Note on Measure 37
Claimants should understand that a decision by Deschutes County may not enable them to proceed with
future development or construction unless the State of Oregon approves a waiver of applicable State land
use regulations. Claimants who wish to obtain information relative to their "State" claims under Measure
37 are advised to contact the State Department of Land Conservation and Development and the
Department of Administrative Services.
Page 14 of 14 - Exhibit A - Order No. 2007-059
EXHIBIT B
Willamette Meridian, Oregon. Township 21 South, Range
13 East, Section 30, Lots 3, 4, 5, 7, 9 and the W1/2SEl/4SV?l/4,
as shown on the supplemental plat of said township, accepted
January 22, 1963 and consists of 157.47, as more particularly
describers in Patent No. 3£-80-0006 dated the third day of July,
1980. Said patent recorded in deed records, Deschutes County,
Oregon.
EXHIBIT B