Wetherell v. Douglas County

Citations: 160 P.3d 614; 342 Or. 666; 2007 Ore. LEXIS 498Docket: LUBA 2005-045; CA A129999; SC S53437; LUBA 2005-075; CA A130181; SC S53438

Court: Oregon Supreme Court; May 24, 2007; Oregon; State Supreme Court

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The Supreme Court of Oregon heard consolidated land use disputes involving Shelley Wetherell, Janell Stradtner, and Friends of Douglas County against Douglas County and petitioners Great American Properties Limited Partnership and Randy and Dannette Walker. The court reviewed decisions from the Court of Appeals concerning an administrative rule that prohibits considering "profitability" and "gross farm income" in designating land as "agricultural land" under Oregon's Goal 3 land use planning policy. The Court of Appeals deemed the prohibition against gross farm income invalid while upholding the prohibition against profitability. However, the Supreme Court found both prohibitions invalid, affirming in part and reversing in part the Court of Appeals’ decisions, and remanding the cases back to the Land Use Board of Appeals (LUBA) for further proceedings. The properties in question were zoned for "exclusive farm use, grazing" and designated as "farm forest transitional," with petitioners seeking changes to their zoning and comprehensive plan classifications.

The landowners argued that their properties were no longer viable for farming or grazing and requested the county to change zoning to permit five-acre rural residential lots. Despite opposition from individuals and the Friends of Douglas County, the county approved the applications, relying on expert evaluations that determined the lands could not sustain profitable agricultural use. Specifically, for Great American's property, experts noted that while a small portion was suitable for grapes, establishing a commercial vineyard was impossible, and the property’s grazing capacity was insufficient according to local standards. Similarly, the assessments for the Walkers' property indicated it was unsuitable for general crop farming, with low grazing capacity that did not meet agricultural standards.

The county deemed neither property qualified as "agricultural land" under relevant regulations and granted the requested zoning changes. Friends of Douglas County and individuals, including Wetherell, appealed the decisions to the Land Use Board of Appeals (LUBA). LUBA remanded the zoning changes back to the county, ruling that the county had incorrectly factored in the profitability of the lands in its determinations. LUBA referenced OAR 660-033-0030, which states that profitability should not influence whether land is classified as agricultural. Following LUBA's remand, Great American and the Walkers sought judicial review, claiming that OAR 660-033-0030(5) was invalid as it conflicted with the statutory definition of "farm use," which includes the necessity of generating profit through agricultural activities.

Petitioners claimed that a rule preventing the consideration of "profitability" and "gross farm income" conflicted with the statutory definition of "farm use" under Goal 3, which includes "profit in money." The Court of Appeals upheld this view, stating that "agricultural land" under Goal 3 includes land suitable for "farm use," as defined by ORS 215.203(2)(a). The court referenced its previous decision in 1000 Friends v. Benton County, which defined "profit in money" as "gross income," concluding that OAR 660-033-0030(5) was invalid for excluding these considerations in determining agricultural land. The court also noted that while the rule's mention of "profitability" could suggest a traditional definition, it ultimately affirmed that profitability could not be factored into agricultural land determinations. The court remanded the cases to LUBA, instructing it to update its remand instructions based on this ruling. Although the petitioners were partially successful, they sought further review, arguing that the Court of Appeals misinterpreted ORS 215.203(2)(a) by equating "profit in money" with "gross income" rather than "net profit." They contended that "profit" should refer to net operating income after expenses, a definition supported by the Oregon Tax Court. Conversely, Wetherell and the Land Conservation and Development Commission disagreed with the petitioners' interpretation of "profit in money" but aligned with the Court of Appeals in asserting that OAR 660-033-0030(5) should allow consideration of "gross income."

LCDC requests the court to affirm LUBA's decision that the county improperly factored profitability into its evaluation of land suitability for farm use. Under Goal 3, "agricultural land" encompasses not only specific soil types ideal for farming but also other soils deemed suitable based on criteria such as soil fertility, grazing suitability, climate, water availability, land use patterns, and farming practices. LCDC asserts that since the disputed land is categorized as "suitable for farm use," considerations of actual net profit or gross farm income are inappropriate for determining agricultural land status. LCDC argues that suitability should focus on the land's characteristics and adaptability for farming, while profitability metrics are easily manipulated and do not reflect inherent land qualities. Consequently, OAR 660-033-0030(5) correctly excludes these factors from agricultural land assessments under Goal 3. The court's inquiry is limited to what information the county may consider in land use decisions regarding agricultural land, not the correctness of those decisions regarding profitability or income. Oregon's agricultural land use policy aims to preserve agricultural land to conserve natural resources and maintain the agricultural economy, emphasizing the importance of exclusive farm use zoning to limit land use alternatives and mitigate urban expansion into rural areas.

The legislature has granted the Land Conservation and Development Commission (LCDC) the authority to create rules for land use planning under ORS 197.040(1)(b), with the stipulation that these rules must align with existing statutes and goals. This principle was reaffirmed in the case City of West Linn v. LCDC, where it was established that the planning goals hold precedence over the rules. LCDC has developed 19 comprehensive planning goals, with Goal 3 focusing on the preservation of agricultural lands as mandated by ORS 215.243. 

Goal 3 requires that agricultural lands be preserved for farm use, considering existing and future agricultural product needs, and defines "agricultural land" based on specific soil types and suitability for farming. The current legal dispute centers on what constitutes "suitable for farm use" under this goal. The term "farm use" is referenced in ORS 215.203, which indicates that land must be employed primarily for profit through farming activities. However, OAR 660-033-0030(5) prohibits the use of profitability or gross farm income as criteria for determining agricultural land status under Goal 3. 

The crux of the matter involves whether the interpretation of "profit in money" in ORS 215.203(2)(a) necessitates consideration of profitability, thereby creating a conflict with the administrative rule that excludes it. The court must interpret these terms by examining the legislative intent through the statute's text, context, and related provisions, as well as ensuring a coherent reading of the statute as a whole. Furthermore, while LCDC has not defined "profitability" or "gross farm income" in its rules, the interpretation of "profit" in ORS 215.203(2)(a) remains undefined by the legislature, complicating the resolution of this conflict.

The court has not previously interpreted the term "profit" within the relevant statutes and rules, prompting a reliance on dictionary definitions for clarity. Multiple definitions of "profit" are provided, emphasizing its financial connotations, including advantage, the excess of returns over expenditures, and net income after costs. The statutory definition of "farm use" includes "profit in money," which excludes non-monetary benefits. The court dismisses the broader interpretation of "profit" that encompasses sentimental advantages, confirming that "profit" must include the assessment of costs alongside revenues. The definitions clarify that "profit" refers to the excess of returns over expenses, reinforcing that local governments can consider the costs of farming activities when determining land suitability for "farm use." The court rejects the notion that "profit" equates to "gross income," asserting that while gross income may be relevant, it does not define profit.

Petitioners' definition of profit as "net operating profit" contradicts ORS 215.203(2)(a) because it emphasizes current or potential profitability in tax or accounting terms, while the statute and Goal 3 require assessing land suitability for farm use based on broader agricultural considerations. Land use laws prioritize different policies than tax laws, as established in King Estate Winery, Inc. v. Dept. of Rev. The legislature aims to value bona fide farm properties without urban or speculative influences, allowing a precise definition of profit for tax purposes. However, identifying land "suitable for farm use" involves various factors, including soil quality and farming practices, and land can be suitable for farming even if the owner shows a net operating loss due to tax considerations.

While petitioners correctly argue that net operating profit can inform profit assessments, OAR 660-033-0030(5) improperly prohibits considering "profitability" in agricultural land use determinations, conflicting with ORS 215.203(2)(a) and Goal 3. Thus, OAR 660-033-0030(5) is invalid, allowing factfinders to evaluate "profitability" based on the monetary benefits and costs associated with farm use. Additionally, the rule's prohibition against considering "gross farm income" in suitability determinations is also invalid, as gross income can help assess potential profits from land use. Consequently, local governments must consider "profitability" and "gross farm income" under Goal 3, and OAR 660-033-0030(5) cannot restrict such considerations.

On remand, the Land Use Board of Appeals (LUBA) is required to reassess the county's land use determinations based on a specified interpretation of relevant statutes and rules. While profitability and gross farm income can be factors in assessing land suitability for agricultural use, the determination of whether land qualifies as "agricultural land" hinges on local government conclusions regarding its suitability for farm use, subject to review by LUBA and the courts. The court clarifies that it does not decide the extent of weight to be assigned to profitability or gross farm income in land use decisions but invalidates any rule that prohibits local governments from considering these factors. The Court of Appeals' decisions are partially affirmed and partially reversed, with cases remanded to LUBA for further proceedings. Additionally, the county's determination that the parcels were not "forest land" under Goal 4 was upheld by LUBA and affirmed by the Court of Appeals, but this issue is not under review. Definitions of "farm use" under ORS 215.203(2)(a) are provided, encompassing various agricultural activities and their associated requirements.

The Court of Appeals based its conclusions on the precedent set in 1000 Friends v. Benton County, affirming that the earlier decision was not "plainly wrong," although it acknowledged that the reasoning was "curious" and potentially counterintuitive. Wetherell submitted a brief in the Great American case, which is relevant to her arguments in the Walker case due to their consistency across different legal forums. The issues at stake are significant questions of first impression concerning Oregon land use statutes, prompting the court to invite an amicus curiae brief from the Department of Justice on behalf of the Land Conservation and Development Commission (LCDC). LCDC requested a remand to allow intervention to defend the validity of a specific administrative rule; however, it has the right to intervene under Oregon Rules of Appellate Procedure (ORAP) without needing a remand. The relevant policy areas are outlined in various Oregon Administrative Rules. The statewide planning goals, including Goal 3, are not codified in the Oregon Revised Statutes but are published individually by LCDC. ORS 215.700 permits certain owners of less productive land to build a dwelling, but it does not apply to petitioners seeking to subdivide their property. In Meeker v. Board of Commissioners, the court refrained from addressing the definition of "farm use" under ORS 215.203(2)(a) in a case about agricultural land subdivision. The Court of Appeals reaffirmed its interpretation of ORS 215.203 in 1000 Friends, despite that decision being based on a provision repealed in 1973, which had previously included a gross income requirement for defining "farm use."

Or Laws 1973, ch 503, indicates that there is no statutory requirement for landowners to demonstrate a specific level of current economic activity for their land to qualify as "farm use" land. As such, the rationale from the Court of Appeals in 1000 Friends is rejected. The definition of "suitable for farm use" encompasses various types of nonproductive land, including land that is fallow for a year, wasteland, water impoundments adjacent to farm land, and land left idle due to a farmer's illness, all of which may still be classified as farm use despite not generating profit. LCDC has the authority to develop rules for implementing land use planning statutes and may provide guidance on how local governments should consider "profit in money." However, it cannot prohibit local governments from factoring in profitability or gross farm income when assessing land suitability for farm use.