Final answer:
Paulsen considers Storm a special dog because Joe Dagget, recognizing the dog's good nature, believes it is cruel to keep him tied up and sees him as kind despite the town's fearful perception.
Step-by-step explanation:
Paulsen thinks Storm is a special dog because Storm, though intimidating to others due to his reputation and the way he is chained, is recognized by a character named Joe Dagget as being good-natured. The context provided suggests that the dog's true demeanor is overshadowed by the town's perception of him, as he is seen as a creature to be feared. However, Dagget sees past the dog's reputation and recognizes his true, gentle nature, making him special in his eyes. He expresses his belief that it is cruel to keep Storm tied and even considers freeing him. Dagget's assessments of Storm's character are based on his own personal interactions and shrewd understanding rather than the town's fearful rumors.