ORDERS:
FINAL ORDER AND DECISION
STATEMENT OF THE CASE
This matter is before the Administrative Law Court pursuant
to S.C. Code Ann. 28-11-10 (1991 & Supp. 2004) and 49 C.F.R. §§ 24.1, et seq., upon Petitioner’s request for a contested case hearing to review a
decision of Respondent South Carolina Department of Transportation denying
certain residential replacement relocation assistance benefits. After notice
to the parties, a contested case hearing on the merits was held on September 7,
2005, at the offices of the Administrative Law Court (ALC or Court) in Columbia, South Carolina.
FINDINGS
OF FACT
Having
observed the witnesses and exhibits presented at the hearing and taking into
consideration the burden of persuasion and the credibility of the witnesses, I
make the following findings of fact by a preponderance of evidence:
1. Notice
of the date, time, place, and subject matter of the hearing was provided to all
parties in a timely manner.
Background
2. The
South Carolina Department of Transportation (Respondent or SCDOT) initiated a
road building project involving the relocation of the intersection of Highway
41 and Highway 17 North in 2003. Petitioner was the owner of property located
at 2906 Highway 17, Mt. Pleasant, South Carolina, which was necessary to
acquire to complete the intersection improvement project. Therefore, the
property was acquired by SCDOT pursuant to a condemnation action. The
condemned property consisted of a building that contained Petitioner’s ice
making business,[1] leased retail space, and purportedly an apartment utilized by Petitioner as his
primary residence.
By
letter dated November 6, 2003, SCDOT advised Petitioner that he was eligible
for a maximum residential replacement housing payment of $26,206.00 if he
purchased replacement housing for at least $80,000.00 and satisfied other additional
requirements. The letter stated that the offer of payment was conditional and subject
to change if the just compensation payment for the acquisition of the property
changed. At the time the November 6, 2003, letter was written, SCDOT had
offered Petitioner $550,000.00 as just compensation for the acquisition. SCDOT
subsequently paid Petitioner $800,000.00 (plus $10,000.00 in lieu of billboard
relocation expenses) pursuant to a settlement agreement the parties entered into
on August 6, 2004. This settlement was not apportioned as to the amounts
allocated for the ice making business, the leased retail space, or the
apartment.
Evidence
of Residency
3. After
issuing its letter advising Petitioner that he was eligible for moving costs
and replacement housing benefits, SCDOT learned that Petitioner was married to
Gloria Amerson and that she owned a home on the Isle of Palms, South Carolina. SCDOT then reversed its earlier stance that Petitioner was eligible for replacement
housing benefits. Petitioner argues that he and his wife maintained separate
residences and that the apartment in the ice making business at 2906 Highway 17
was his primary residence.
The
relevant period during which Petitioner must have been a resident of the
apartment at the ice business was from March 24, 2003, to September 24, 2003.
The evidence in this case certainly creates a question as to Petitioner’s
actual residence during the period in question. Mr. Raih operated his ice
company in a portion of the building during the relevant period of inquiry.
Though Mr. Raih contends it was necessary for him to be present during the
night and early morning hours to unload the ice machines, his testimony
established that he was often absent from the apartment for extended periods of
time. Moreover, the apartment which Petitioner claims was a separate residence
from his wife was situated in the same vicinity as is his wife’s residence.
Furthermore, his driver’s license, which is required by law to reflect his
current address, denoted his address as 1120 Belvedere Terrace at that time,
which is the address at which he resided prior to 2906 Highway 17. See S.C. Code Ann. § 56-1-230 (1991) (ten days to notify Department of Motor
Vehicles of permanent change of address). Additionally, Petitioner did not
avail himself of lower property taxes on the 2906 Highway 17 property by
certifying that he occupied it as a primary residence pursuant to S.C. Code
Ann. § 12-43-220(C) (2000 & Supp. 2004). He also did not account for the
separate costs of phone, electricity, or property insurance devoted to his
personal use at 2906 Highway 17 in his income taxes.
Nevertheless,
in the years prior to and including the condemnation, Petitioner's personal
telephone number was listed in the Bellsouth telephone book at the 2906 Highway
17 address. Though SCDOT offered evidence that Petitioner’s property did not
appear lived in, it had no direct evidence that Mr. Raih did not live at
the subject apartment as he claimed. Moreover, SCDOT had no evidence that Mr.
Raih was living at his wife’s home on the Isle of Palms during the critical 180
day period prior to September 24, 2003 either. Based on the above the evidence
presented, I find that Mr. Raih owned and occupied the subject property as his
primary residence and abode during the relevant period.
4. Subsequent
to the condemnation settlement, Mr. Raih purchased another residence in Mt. Pleasant , South Carolina, which he now claims to use as his primary residence.
Nevertheless, his wife continues to use the Isle of Palms home as her primary
residence. Furthermore, though Mr. Raih emphasized the significance of his
personal listing in the Bellsouth telephone book, he has not had such a listing
since the condemnation.
Replacement
Dwelling Location
5. Petitioner’s
apartment was located in Mt. Pleasant, South Carolina. In computing
Petitioner’s potential price differential replacement dwelling payment pursuant
to 49 C.F.R. § 24.401(c), SCDOT identified three potential comparable
replacement dwellings in North Charleston rather than Mt. Pleasant. SCDOT
chose a residence located at 7720 Desmond Avenue in North Charleston as the
most comparable. Petitioner argues that a dwelling located at 1527 Cambridge Lakes Drive in Mt. Pleasant should have been selected as the most comparable
and argues that the neighborhood of the Desmond Avenue residence is not as
desirable.
Petitioner’s
apartment was in a commercial area of Mt. Pleasant with substandard housing
units located in the immediate vicinity. The upstairs apartment had no private
access and no kitchen.[2]
The only access to the apartment was through the ice making business. Though
the Desmond Avenue listing was in North Charleston and was a greater distance
from Mr. Raih’s relocated business than the Mt. Pleasant listings, it was not
feasible to locate a comparable replacement dwelling in Mt. Pleasant. The potential replacements available on the market at that time in Mt. Pleasant were far superior to this apartment. For example, the Cambridge Lakes condominium used by Petitioner as a comparable is significantly superior and has many
more amenities than Petitioner’s apartment in the ice making business. In
addition to having private access and a readily accessible private kitchen, it
contains amenities such as a clubhouse, a golf putting green, extensive
landscaping, and decorative outdoor fountains.
Therefore,
SCDOT selected the Desmond Avenue dwelling from a similar, nearby neighborhood
where housing costs were generally the same, if not greater, than the cost in
the vicinity of Petitioner’s Highway 17 apartment. Though the North Charleston
area is overall generally less desirable than Mt. Pleasant area, the Desmond Avenue neighborhood is better than the immediate neighborhood of Petitioner’s
Highway 17 property. It is in a safer area that is at least as desirable with
respect to the public utilities and facilities than the area adjacent to
Petitioner’s Highway 17 property. Furthermore, it is in a location that is
reasonably accessible to Mr. Raih’s new business location on Meeting Street. Additionally, when considering the lack of access to the Highway 17
apartment, the noise emanating from the ice machines, and the apartment’s
obvious lack of amenities, the Desmond Avenue dwelling is far superior.
Accordingly, the Desmond Avenue house is functionally equivalent to and more
desirable than Petitioner’s displaced apartment.
Acquisition
Cost of the Replacement Dwelling
6. In
determining the payment for a replacement dwelling, SCDOT calculated Petitioner's
residential housing payment by estimating the value of the residential
apartment on a square foot allocation of the condemnation settlement amount.
In other words, the displaced dwelling payment was calculated based on an
approximate 10.07% allocation of the settlement amount resulting in a value of
$80,560.00. Petitioner calculated the displaced dwelling value based on
residential rental income. Petitioner argued that the value for the whole
property exceeded the amount of the settlement.
I
find that though the comparables sales approach may certainly be used to
determine the value of the apartment, no acceptable comparable sales were
established by either party. Furthermore, attributing 10.07% of the
unallocated compensation payment to the apartment is a reasonable and more
accurate method of determining the difference between the residential value of
the displaced dwelling and a comparable replacement dwelling. Accordingly, an
appropriate calculation of the potential price differential payment is to
compare $80,560.00 as the acquisition cost of the dwelling (10.07% of the final
acquisition amount of the mediated settlement or $800,000.00) to $80,000.00
(the list price of the Desmond Avenue dwelling). Moreover, the rental value of
Petitioner's property is far less that the commercial value utilized in the
settlement. Thus, any errors made by the use of that calculation method would
work in favor of Petitioner.
Storage
Claim
7. On December 15, 2003, SCDOT paid Petitioner $900.00
for storage of his personal belongings at Stow-Away Storage in Mt. Pleasant for the period from December 1, 2003 to May 1, 2004. However, Petitioner
removed his personal belongings from Stow-Away Storage in December 2003, and
stored them at his new business on property owned by Petitioner.
CONCLUSIONS
OF LAW
Based
upon the above Findings of Fact, I conclude the following as a matter of law:
1. The
ALC has subject matter jurisdiction in this case pursuant to S.C. Code Ann. §
1-23-600(B) (2005) and 25A S.C. Code Ann. Regs. 63-322(D) (Supp. 2004).
2. 49
C.F.R. Part 24 contains the criteria which SCDOT must follow in determining a
person’s entitlement to relocation assistance payments. See also S.C. Code Ann. § 28-11-10 (1991 & Supp. 2004).
Eligibility
4. Petitioner
argues that SCDOT was required to select a comparable replacement dwelling from
Mt. Pleasant and that the Cambridge Lakes Condominium was the most comparable
replacement dwelling available in Mt. Pleasant. 42 U.S.C.A. § 4601 defines
“comparable replacement dwelling” as:
5. A
person eligible for a replacement housing payment is entitled to receive “the
amount necessary to relocate to a comparable replacement dwelling.” 49 C.F.R. §
24.401(b). The payment shall be the sum of:
(1) The amount
by which the cost of a replacement dwelling exceeds the acquisition cost of the
displacement dwelling, as determined in accordance with paragraph (c) of this
section;
(2) The
increased interest costs and other debt service costs which are incurred in
connection with the mortgage on the replacement dwelling, as determined in
accordance with paragraph (d) of this section; and
(3) The
reasonable expenses incidental to the purchase of the replacement dwelling, as
determined in accordance with paragraph (e) of this section.
Id. In determining the acquisition cost, the Court must also determine the
reasonable cost of the comparable replacement dwelling. That determination is
made in accordance with 49 C.F.R. § 24.403(a). Section 24.403 (a)(1) provides
that “[i]f available, at least three comparable replacement dwellings shall be
examined and the payment computed on the basis of the dwelling most nearly
representative of, and equal to, or better than, the displacement dwelling.” Additionally,
if the displacement dwelling was part of a property that was used for
nonresidential purposes “only that portion of the acquisition payment which is
actually attributable to the displacement dwelling shall be considered the
acquisition cost when computing the replacement housing payment.” Section
24.403(a)(7).
Petitioner
argues that SCDOT erred in its replacement price payment determination because
it failed to use the Cambridge Lakes Condominium dwelling as its comparable.
However, it was not feasible to locate a comparable replacement dwelling in Mt. Pleasant because the potential replacement dwellings available on the market at that time
in Mt. Pleasant were all far superior to Petitioner's apartment. Therefore,
SCDOT was required to select three comparable dwellings from a “nearby or
similar neighborhood” where housing costs are generally the same or higher.
The Desmond Avenue dwelling meets the criteria of Section 24.401(b), being a
nearby or similar neighborhood where housing costs are generally the same as or
higher than the costs for housing in the immediate vicinity of the subject
property at 2906 Highway 17. It is in a location generally not less desirable
than the location of the ice house apartment with respect to public utilities
and commercial and public facilities, and is reasonably accessible to Mr.
Raih’s new business location on Meeting Street. Furthermore, the Desmond Avenue house was the most similar dwelling presented before the ALC and is superior
to the displacement dwelling. Therefore, the Desmond Avenue dwelling is the
most comparable dwelling for purposes of calculating any potential price
differential payment within the requirements of 49 C.F.R. Part 24.
6. Petitioner
further argues that SCDOT erred in its calculation of the maximum price differential
payment because it attributed a greater portion of the condemnation acquisition
payment to the residential dwelling unit than was allowable under the
regulations. He contends that the value of the displaced dwelling must be
established by a licensed real estate appraiser who contrasts the value of a
comparable replacement dwelling in the neighborhood or near neighborhood to the
displaced dwelling.
Petitioner
calculated the displaced dwelling value based on residential rental income.
SCDOT, on the other hand, made that determination by estimating the value of
residential portion of the displacement property on a square foot allocation.
In other words, SCDOT divided the total square feet of the displaced property
into the residential portion of the property and determined that 10.07% of the
condemnation settlement amount was attributable to the residential portion of
the displacement property.
Market
analysis is certainly an approved method of determining the value of property. See
49 C.F.R. 24.401(c)(2)(iii). However, Section 24.403(a)(7) does not require
that a market analysis be used to determine what portion of the commendation
payment is actually attributable to the residential portion of the displaced
dwelling. It only requires that the portion of the payment “which is actually
attributable to the displacement dwelling” be determined. Once determined,
that portion is considered to be the acquisition cost in calculating the price differential
payment. Such an apportionment of the payment is not equivalent to performing
an appraisal to establish the market value of the dwelling. Additionally,
though there are numerous provisions setting forth appraisal requirements under
49 CFR Subpart B (Real Property Acquisition), there are no such requirements
under Subparts D (Payments for Moving and Related Expenses) or E (Replacement
Housing Payments), which are the relevant provisions in this case. Therefore,
SCDOT’s suggested method of calculating the unallocated compensation payment
for Petitioner’s apartment is reasonable and in accordance with the
requirements of 49 C.F.R. Part 24.
Furthermore,
I find no requirement that the value of the displaced dwelling must be
established by a licensed real estate appraiser or that SCDOT’s valuation
estimates constituted a rendering of a real estate appraisal. During the
hearing, SCDOT employees were permitted to testify as to what value they gave
the displaced dwelling in calculating the price differential payment based upon
the portion of the settlement they considered as the acquisition cost. The
SCDOT employees were not licensed appraisers. Nevertheless, S.C. Code Ann. § 1-23-330
(2005) provides that “[t]he agency's experience, technical competence and
specialized knowledge may be utilized in the evaluation of the evidence.” The
employees displayed experience, technical competence, and specialized knowledge
in determining the value of Petitioner's property, especially for the purposes
of determining the portion of the acquisition payment which is attributable to
the displacement dwelling. Accordingly, the employees properly testified to
their determinations.
Moreover,
SCDOT relied on the appraisal prepared by Gary Pruitt to determine the
allocation in this matter. Mr. Pruitt holds a license as a S.C. General Real
Estate Appraiser with an MAI designation. Mr. Pruitt’s appraisal valued the
property according to a combination of the Sales and Income approaches to
estimating value. In both his Sales and Income valuation analyses, Pruitt
assigned the apartment the same value as the commercial space within the
building. He stated his basis for doing so was that the apartment “could
easily be converted to office area,” which was the highest and best use of the
space. Mr. Pruitt’s testimony alone warrants a determination that 10.07% of
the condemnation settlement amount was attributable to the residential portion
of the displaced property.
Therefore,
I find that the evidence supports that the appropriate price differential payment
based upon 10.07% of the mediated settlement was $80,560.00.
ORDER
Based
upon the above Findings of Fact and Conclusions of Law:
IT IS HEREBY ORDERED that this case is dismissed.
AND IT IS SO
ORDERED.
_________________________________
Ralph
King Anderson, III
Administrative
Law Judge
December 19, 2005
Columbia, South Carolina
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