SC Administrative Law Court Decisions

Having observed the witnesses and all the evidence and having closely passed upon their credibility, and having taken into consideration the respective burden of persuasion by the parties, I make the following Findings of Fact by a preponderance of evidence:

Property-

1.         The Property is located at 165 Lake Murray Terrace, Lexington County, South Carolina.  Its legal description is Lake Murray Terrace Lot #8 and its tax map sheet (“TMS”) number is 003426-01-008.   It was purchased by Petitioner on October 15, 1996 from the Wilkins Family Limited Partnership for $165,000.00. 

2.         The Property is located in a neighborhood off Yachting Road on a cove on the shores of Lake Murray.  The Property contains approximately 0.60 acres and is bounded for a distance of approximately 115.4 feet on the waters of Lake Murray.[1]  Located on the Property is a single story dwelling that contains a basement. It is in a highly desirable location because of its lake frontage. Further, the water in the cove abutting the Property is deep and thus the Property is more valuable than those lots with shallow water frontage.    

3.         This area in Lexington County is also popular with the buying public because it is located approximately 2 1/2 miles northwest of the central business district of the City of Lexington and 11 miles west of the central business district of the City of Columbia.  It is one of the fastest growing areas in the State of South Carolina, with some houses on Lake Murray selling in excess of $1,000,000.00. 

4.         The Property was valued for assessment purposes on December 31, 2004 for the tax year 2005.

Procedural-

5.         On April 18, 2005, Respondent mailed an assessment notice to Petitioner which stated that the value of the Property was $428,700.00. On May 20, 2005, Respondent received a request from Petitioner for an informal review of the valuation.

6.         On June 29, 2005, Petitioner met with Respondent’s real estate appraiser, James N. McGee, Jr.  Subsequently, Respondent conducted a field review of the Property and on August 8, 2005 mailed to Petitioner its results which provided for a reduction in the Property’s value from $428,700.00 to $365,220.00. Respondent maintained that the value of the land was $330,000.00 and the value of the improvements was $35,220.00.[2]

7.         On August 18, 2005, Respondent received a request for a formal review from Petitioner and on October 19, 2005, Petitioner met with Mr. McGee once again.  Thereafter, Respondent conducted an additional review and on December 22, 2005 mailed a letter to Petitioner which stated that its valuation for the Property remained at $365,220.00.

8.         Petitioner appealed this final determination by Respondent to the Board.  On April 19, 2006, the Board conducted a hearing and on April 20, 2006, the Board issued its written decision which valued the Property at $365,220.00. 

9.         Petitioner then filed a request for a contested case hearing with this Court on May 19, 2006, asserting that the Property had not been fairly and equitably assessed when compared to like properties with frontage on Lake Murray in Petitioner’s tax district.  Petitioner asserts that Property should be valued at $178,720.00, with $150,000.00 assigned to the land and $28,720.00 assigned to the residence.[3]  Respondent asserts that the value of the Property is $365,220.00, with $330,000.00 assigned to the land, $28,720.00 to the residence, and $6,500 in improvements.

Valuations-

10.       Respondent used the mass appraisal procedure in the reassessment process in determining the Property’s value of $428,700.00, of which $330,000.00 was assigned to the land and the remainder allocated to improvements. The mass appraisal method used by Respondent in valuing properties in this neighborhood utilized a base of $300,000.00 for lots that had lake frontage.[4]  Values were thereafter adjusted, using factors such as view, size, water depth, percentage in flood plain, shape, and road access.   After a formal review of the Property was conducted by Respondent, this value was lowered to $365,220.00. A value of $330,000.00 was assigned to the land, $28,720.00 to the residence, and $6,500.00 to miscellaneous improvements. 

            11.       Prior to the Board hearing, James N. McGee, Jr., an appraiser employed by Respondent, appraised the Property using the sales comparison and cost methods.  In his Uniform Residential Appraisal Report (Report) dated March 29, 2006, Mr. McGee valued the Property at $410,000.00.[5] 

12.       Mr. McGee used three comparables in the sales comparison methodology.  All are located within ½ mile of the Property, front on Lake Murray, and are in the same general area of Lexington County.[6]  A table using numbers from his Report that utilized the sales comparison method follows:

Properties:     165 Lake Murray      173 Lake Murray      113 Yachting              223 Able

                               Terrace                       Terrace                     Circle                Harmon Lane    

_____________________________________________________________________________ 

Tax Map #     0034260-01-008        003426-01-006        003425-01-005      003423-01-020        

Acreage                  0.60                              0.55                          1.36                       1.10   

Waterfront           115 ft.                       120 ft.                  195 ft.                 158 ft.

View               open lake/avg.          open lake/avg.    open lake/superior  open lake/superior

Dock                dock/ramp                dock/ramp        dock/ramp/cabana     dock/workshop

Living Space       1735 sq.ft                2,012 sq.ft.            1,700 sq.ft          2,155 sq.ft.

Rooms                                   6                            6                          6                         6

Condition              fair                       good                    average                   good

Construction      brick/avg.              brick/good           brick/avg-good          brick/avg. 

Finished basement  yes                         yes                        yes                       yes

HVAC                central                     central                   central                   central

Age                       35 years               5 years                 32 years                 28 years

Sales Date                   --                           12/02                     10/03                    02/04  

Sales Price                --                         $550,000                   $700,000                  $625,000

Sales Price

per sq. ft.                --                      $273.36                 $411.76                $290.02

13.       In preparing his Report, Respondent also considered the sale of a vacant lot at 122 Lake Murray Court (TMS# 003300-07-090) that sold in July of 2002 for $350,000.00.  This lot is located a distance of six lots into the cove from the Property, contains 0.65 acres and has approximately 140 feet of waterfront.  Respondent’s appraiser opined that the view from this lot was less desirable than the view from the Property.  Further, the appraiser noted that this lot did not have any road frontage.[7]

14.       Respondent assigned to the Property a value of $413,000.00 when valuing it using the sales comparison approach method and a value of $403,980.00 when using the cost approach method.  He used these two values to assign a value of $410,000.00 to the Property.  

            15.       In arriving at his valuation, Petitioner used three different comparables: 122 Lake Murray Court (TMS # 003300-07-090); 444 Harbor Heights Drive (TMS # 003325-01-024); and 124 Lake Murray Court (TMS # 003300-07-059). 

            16.       The first comparable Petitioner used, 122 Lake Murray Court (TMS # 003300-07-090), is the same lot referred to by Mr. McGee in his report. It is back in the cove and sold for $350,000.00 in 2002.  Since this property sold for cash, Petitioner assigned a 20% “down payment finance adjustment” ($70,000.00), a 7% real estate sales fee adjustment ($24,500.00) because no real estate agent was involved, a lot size adjustment (0.05 acre difference in the lots size) of $17,500.00, and an adjustment for slope of land and drainage of $10,000.00.  This reduced its value to $228,000.00.  The net effect using this method would be a price per acre for comparison purposes of $319,200.00.

Petitioner believes that in valuing property, adjustments must be made to its value when real estate agents are not involved and when the property is not financed.  He argues that such sales are not made between a willing buyer and seller.

            17.       Petitioner used the property at 444 Harbor Heights Drive to which Respondent had assigned a value of $250,000.00 to the land.  Petitioner assigned a lot size adjustment (0.40 acre) of $100,000.00 to this property which resulted in an adjusted total valuation of $150,000.00.  Based upon the acreage of this lot, the price per acre for comparison would be $250,000.00.

            18.       Lastly, Petitioner used the property located at 124 Lake Murray Court.  He noted that its land consisted of 2.28 acres and had been assigned a value of $410,320.00 by Respondent.  Petitioner then adjusted this value by $299,926.00 since his lot was only 0.60 acre, which gave it a value of $110,403.00.  This gave a price per acre for comparison of $184,004.04. 

19.       Using these comparisons from these sales, Petitioner argued that his land had a value of $150,000.00. As Petitioner had agreed to a valuation of $28,720.00 for the residence, he arrived at a total valuation of $178,720.00 for the Property.

20.       Further, Petitioner noted that although he had earlier listed his Property for sale at $395,000.00 and subsequently at a reduced price of $350,000.00, such was not evidence suggesting its worth as that determined by Respondent. 

21.       There is no evidence in the record that the comparison sales used by Respondent were not between willing buyers and willing sellers.  

22.       In the summer of 2005, Petitioner utilized the services of Carolina First Mortgage, located at 1501 Main Street, Columbia, South Carolina to obtain a loan.  He used the Property as security for the loan. 

            23.       On July 7, 2005, Ann Petty, a professional appraiser, prepared a written appraisal of the Property.  In her report, Ms. Petty used the sales comparison method in valuing the Property at $460,000.00.[8] Also, in her report she stated that the Property was located in a neighborhood where houses had been selling well and that it was a popular location because it was situated on Lake Murray and due to its proximity to Lexington.[9]

24.       On August 17, 2005, Petitioner borrowed $260,000.00 from Option One Mortgage Corporation, a California Corporation and executed a real estate mortgage, using the Property as security for the loan.  The mortgage was recorded in the Lexington County Register of Deeds office on August 23, 2005.[10] 

CONCLUSIONS OF LAW

            Based on the foregoing, I conclude as a matter of law:

1.         The Administrative Law Court has jurisdiction of this matter pursuant to S.C. Code Ann. § 12-60-2540.

2.         The standard of proof in proceedings before the ALC is a preponderance of the evidence.  Anonymous v. State Bd. Of Medical Examiners, 329 S.C. 371, 496 S.E.2d 17 (1998). The Assessor’s decision as to the situs of property, its taxability, and the valuations put on it generally is presumed correct until the contrary appears, and the person complaining has the burden of proving his grievance.  Cloyd v. Mabry, 295 S.C. 86, 367 S.E.2d 171 (Ct. App. 1988).  In this case, Petitioner has the burden of showing that the valuation of the taxing authority is incorrect.  Ordinarily this is done by showing the actual value of the property.  Id. at 173.  

3.         The weight and credibility assigned to evidence presented at the hearing of a matter is within the province of the trier of fact.  See S.C. Cable Television Ass’n v. S. Bell Tel. & Tel. Co., 308 S.C. 216, 222, 417 S.E.2d 586, 589 (1992); see also Doe v. Doe, 324 S.C. 492, 502, 478 S.E.2d 854, 859 (Ct. App. 1996) (holding that a trial judge, when acting as a finder of fact, “has the authority to determine the weight and credibility of the evidence before him”).  Furthermore, a trial judge who observes a witness is in the best position to judge the witness’s demeanor and veracity and to evaluate the credibility of his testimony.  See Woodall v. Woodall, 322 S.C. 7, 10, 471 S.E.2d 154, 157 (1996).

4.         Where an expert's testimony is based upon facts sufficient to form the basis for an opinion, the trier of fact determines its probative weight.  See  Berkeley Elec. Coop. v. South Carolina Pub. Serv. Comm'n., 304 S.C. 15, 402 S.E.2d 674 (1991); Smoak v. Liebherr-America Inc., 281 S.C. 420, 314 S.E.2d 116 (1984).  A trier of fact is not compelled to accept an expert's testimony, but may give it the weight and credibility he determines it deserves.  Florence Cty. Dep't. of Social Serv. v. Ward, 310 S.C. 69, 425 S.E.2d 61 (Ct. App. 1992); Greyhound Lines v. S.C. Pub. Serv. Comm’n., 274 S.C. 161, 262 S.E.2d 18 (1980).

5.         The Constitutional and statutory authority which is applicable to this case is S.C. Cons. art. X, §1, which provides that “fair market value” is the standard for property taxation in this State.  Section 12-37-930 (Supp 2005) of the Code provides that all property is to be valued “at its true value in money which is the price which the property would bring following reasonable exposure to the market, where both seller and buyer are willing, are not under compulsion, and are reasonably well informed of the uses and purposes for which it is adapted and for which it is capable of being used.” In short, the fair market value of property is the measure of its true value for taxation purposes. See Lindsey v. S.C. Carolina Tax Comm’n, 302 S.C. 504, 397 S.E.2d 95 (1990).

6.         The date for valuation for property tax purposes is "the thirty-first day of December next preceding" the tax year under consideration.  S.C. Code Ann. § 12-37-900 (Supp. 2005).  In the case at hand, the tax year is 2005; therefore, the valuation date is December 31, 2004.

7.         To determine a fair market price for the Property, comparison of the sale price of other properties of the same character may be utilized.  Cloyd, supra; 84 C.J.S. Taxation §§ 410-411 at 785, 797 (1954).  

8.         In estimating the value of land, all of its elements or incidents which affect market value or would influence the mind of a purchaser should be considered, such as location, quality, condition, and use.  1969-70, Op. S.C. Atty. Gen., No. 3045 at 337; See also 84 C.J.S. Taxation § 410 at 784; § 411 at 794 (1954).

9.         “Appraisal is, of course, not an exact science and the precise weight to be given to any factor is necessarily a matter of judgment, for the court, in the light of the circumstances reflected by the evidence in the individual case.”  Santee Oil Co., Inc., v. Cox, 265 S.C. 270, 217 S.E.2d 789 (1975).   While it is impossible to predict with certainty what a particular property will sell for, utilizing comparable sales is a good indicator of what a potential purchaser will likely pay.  That is, utilizing comparables present probative evidence of the market value of the subject property if the comparables are similar in character, location, and physical characteristics.  See 84 C.J.S. Taxation § 411 (1954). 

10.       The assessment of all property shall be equal and uniform.  S.C. Const. art. X, § 1.  However, complete equity and uniformity are not practically attainable when valuing property.  Wasson v Mayes, 252 S.C. 497, 502, 167 S.E.2d 304, 306-307 (1967). 

11.       The intentional and systematic undervaluation of certain properties, while other properties in the same class are valued at fair market value, is constitutionally proscribed.  See Sunday Lake Iron Co. v. Wakefield Township, 247 U.S. 350 (1918); Owen Steel Co., Inc. v.  S.C. Tax Comm’n, 287 S.C. 274, 337 S.E.2d 880 (1985).  The burden of proving an intentional and systematic undervaluation rests with the complaining party. Sunday Lake Iron Co., 247 U.S. at 353.  This burden is not met by a showing that some properties are undervalued in relation to the taxpayer’s property.  See Sunday Lake Iron Co., 247 U.S. at 350; Owen Steel Co., Inc., 287 S.C. 274, 337 S.E.2d 880 (1985). The taxpayer has failed to establish either that the Assesssor has intentionally or systematically undervalued property in Lexington County, or that his property has not been equitably valued. 

12.       Initially, the Assessor used the mass appraisal method to value the Property.  Subsequently, it conducted a more in-depth and personal valuation of the Property which consisted of several field reviews.  It considered both the comparable sales method and cost approach method in arriving at a value of $410,000.00 for the Property.  Later it reduced its fair market value of the Property to $365,220.00, with $330,000.00 assigned to the land and $35,220.00 to the residence and improvements.  This valuation was upheld by the Board. 

The Assessor used the sale price of three comparable properties to determine the Property’s fair market value.  Those properties are located in the same general area as the Property and are of similar or like kind in that they are constructed of brick, have similar square footage, and have frontage on Lake Murray. 

Petitioner also utilized the sales of properties in the general area to arrive at his fair market value of $178,720.00 ($150,000.00 assigned to the land and $28,720.00 assigned to the structure/residence). The amount assigned to the structure/residence is the same as that assigned by the Assessor.  The Court notes that houses on properties in this general area are often torn when the property is sold; purchasers desire new construction, and thus the value assigned to the structure/residence is reasonable. However, Petitioner applied adjustments to the valuation for comparable properties where no financing was involved and where no real estate agents were involved.  Further, Petitioner opined that the Court should not give any credence to an earlier sales listing of the Property for $395,000.00.

13.       The Court finds that the methods used by the Assessor are correct and more accurate in valuing the Property.  The Assessor correctly used the methodology outlined for valuing property using the sales comparison approach contained in Chapters 17-19 of The Appraisal of Real Estate, 12^th Ed., 2001.  The evidence supports the finding of the Assessor and the Board that the value of $365,220.00 is the amount a willing buyer would pay to a willing seller for the Property.  The three comparables utilized by the Assessor are reliable indicators of value. 

14.       Petitioner also seeks a reduction in value based on principles of equity.   Petitioner asserts that some of his neighbors own similar property which is valued less than his.  He provided a chart of various properties and their valuations.  His suggestion is if the values of these similar properties are reduced in value, his property will be reduced in value also. Petitioner’s argument is based upon the Equal Protection Clauses of the Federal and State Constitutions, as well as the uniformity provision found in the South Carolina Constitution at Article X, Section 1.  These provisions do not afford Petitioner the relief he seeks.

These constitutional provisions do not require absolute accuracy in property tax matters. Allied Stores of Ohio v. Bowers, 358 U.S. 522, 526 (1959); Owen Steel Co., Inc., 287 S.C. 274, 337 S.E.2d 880 (1985).  Although complete equity and uniformity are not practically attainable when valuing properties, there must not be an intentional and systematic undervaluation of certain properties while valuing other properties in the same class at fair market value.  Petitioner has not shown that various properties in class similar to the Property located in Lexington County were intentionally and systematically undervalued by the Assessor.  Further, there has been no showing that the Property has in fact been valued higher than similar properties.  The comparables in the Record clearly indicate that the Assessor attempted to value all properties at fair market value.   

Accordingly, the Court finds that the Assessor valued the Property equitably in relation to similar property. There has been no showing of any systematic or intentional undervaluation of property in Lexington County or any showing of any violation of the equal protection clauses of the Federal or South Carolina Constitutions.  Further, there is no violation of the uniformity provision of the South Carolina Constitution as set out at Article X, Section 1.  Petitioner is not entitled to have the Property value lowered due to inequities in assessment. 

16.       Based on the evidence presented before me, I find and conclude that the market value of the Property as of December 31, 2004 is $365,220.00.   

ORDER

              Based upon the foregoing Findings of Fact and Conclusions of Law,

              IT IS HEREBY ORDERED that the value of the Property for the 2005 tax year is $365,220.00; and

              AND IT IS SO ORDERED.

                                                            Marvin F. Kittrell

                                                            Chief Administrative Law Judge

June 12, 2007

Columbia South Carolina