In re Klein

• Decision Date: 24 September 2003
• Docket Number: No. 22694.,22694.
• Citation: 670 N.W.2d 367,2003 SD 119
• Parties: In the Matter of Raymond KLEIN, Appraiser.
• Court: South Dakota Supreme Court

670 N.W.2d 367

2003 SD 119

In the Matter of Raymond KLEIN, Appraiser.

No. 22694.

Supreme Court of South Dakota.

Considered on Briefs August 25, 2003.

Decided September 24, 2003.

Lawrence E. Long, Attorney General, Grant Gormley, Assistant Attorney General, Pierre, South Dakota, Attorneys for appellee State of South Dakota.

Joseph E. Ellingson, Spearfish, South Dakota, Attorney for appellant Klein.

SABERS, Justice.

[¶ 1.] The Department of Commerce and Regulation (Department) found that appraiser Raymond Klein violated the Uniform Standards of Professional Appraisal Practice (USPAP) and imposed sanctions. Klein's state-certified General Appraiser Certificate was suspended for 120 days, a penalty of $1000 was assessed and he was ordered to have his non-residential appraisals reviewed at his expense for six months. Klein appealed to the circuit court and the circuit court affirmed. Klein appeals. We affirm.

FACTS

[¶ 2.] In May 2000, Black Hills Power and Light (BHP) commenced condemnation proceedings against Bailey Associates for an easement to erect power lines. Bailey owned approximately 160 acres of land and the strip BHP was condemning was approximately 6.5 acres. Bailey hired Klein to appraise the property to determine appropriate compensation for the condemned property. Bailey was unaware that this was Klein's first condemnation appraisal.

[¶ 3.] Klein completed his appraisal on May 8, 2000 and the jury trial to determine compensation was held on May 12, 2000. Klein testified and Bailey used his appraisal to support its assertions regarding appropriate compensation. John Widdoss appraised the property for BHP and also testified at trial.

[¶ 4.] After the trial, Widdoss filed a complaint with the Appraiser Certification Program at Department. Widdoss asserted that Klein's appraisal was incompetent because, among other things, it failed to use proper appraisal methods. The Department forwarded the Complaint, Klein's response and supporting documents, and the appraisals to two examiners for review. The examiners independently determined that Klein had committed numerous, significant violations of the USPAP. The examiners both concluded that the appraisal was "not done competently." The examiners jointly compiled a list of the violations they agreed upon and submitted the list to the Department. Based on the violations found by the examiners, the Department recommended that:

1. Klein's state-certified General Appraiser Certificate be suspended for 120 days;

2. Klein pay an "unprofessional conduct penalty fee" of $750; and

3. Klein's non-residential appraisals be reviewed at his expense for six months.

[¶ 5.] Klein requested a hearing and it was held on May 29, 2001. The Secretary accepted the hearing officer's findings and conclusions, and based on the numerous violations, the Secretary imposed sanctions. Klein appealed to the circuit court and after briefing and oral argument, the circuit court affirmed the Department's decision. Klein appeals raising several issues which we consolidate as:

Whether there was sufficient evidence to support the determination that Klein's appraisal was incompetent.

We affirm.

STANDARD OF REVIEW

[¶ 6.] Our standard of review for an administrative appeal is well settled. SDCL 1-26-36 requires us to give great weight to findings and factual inferences drawn by the agency. Sopko v. C R Transfer Co., Inc., 1998 SD 8, ¶ 6, 575 N.W.2d 225, 228 (additional citations omitted). "Agency findings are examined `in the same manner as the circuit court to decide whether they were clearly erroneous in light of all the evidence. If after careful review of the entire record we are definitely and firmly convinced a mistake has been committed, only then will we reverse.'" Western Wireless Corp. v. Dept. of Revenue, 2003 SD 68, ¶ 5, 665 N.W.2d 73, 75 (quoting Sopko, 1998 SD 8 at ¶ 6, 575 N.W.2d at 228). An agency's conclusions of law are fully reviewable. Id. In matters concerning the revocation of a professional license, the agency's burden of proof is clear and convincing. In Re Setliff, 2002 SD 58 ¶ 13, 645 N.W.2d 601, 605.

[¶ 7.] WHETHER THERE WAS SUFFICIENT EVIDENCE TO SUPPORT THE DETERMINATION THAT KLEINS APPRAISAL WAS INCOMPETENT.

[¶ 8.] The administrative rules governing appraisers require that appraisals conform to the USPAP. ARSD 20:14:06:01; ARSD 20:69:10:03. The USPAP requires appraisers to comply with the competency rules and standards set out in its provisions. The competency rule provides:

Prior to accepting an assignment or entering into an agreement to perform any assignment, an appraiser must properly identify the problem to be addressed and have the knowledge and experience to complete the assignment competently, or alternatively:

1. Disclose the lack of knowledge and/or experience to the client before accepting the assignment; and

2. Take all steps necessary or appropriate to complete the assignment competently; and

3. Describe the lack of knowledge and/or experience and the steps taken to complete the assignment competently in the report.

Uniform Standards of Professional Appraisal Practice, 5 (Appraisal Standards Board 2000). The Secretary found that Klein violated this rule and that "[u]nder the circumstances, disciplinary action by the Department is more than warranted, it is a necessity." Klein attacks this finding on several fronts alleging first that he used the proper method of appraisal.

[¶ 9.] The Secretary's final conclusions of law provide in part that "Klein's failure to use the `before and after' approach in the subject appraisal is a violation of the requirement of the USPAP Standards Rule 1-1(a).¹" Klein appears to concede that the before and after method is the appropriate method in cases which involve a partial taking and that this case involved a partial taking. He argues however, that a letter from the judge in the condemnation proceeding indicated the judge's belief that this was not a partial taking. The judge wrote "[t]he taking of an easement in that part of the strip which is not physically occupied by the poles and towers is deemed tantamount to a taking in fee." The judge then cited to several South Dakota Supreme Court condemnation cases to support his opinion regarding determination of just compensation.

[¶ 10.] Klein argues that he agreed with the court and that the opinions cited by the court indicated Klein was not required to use the before and after method. Klein misses the point with this argument. First, Klein fails to understand that the "taking in fee" in this case was a partial taking and the judge's letter did not indicate otherwise. Testimony at the hearing, which the Secretary found "persuasive," indicated that the before and after approach was "text book" in cases of partial taking. Standards Rule 1-1 requires that the appraiser must "be aware of, understand, and correctly employ those recognized methods and techniques that are necessary to produce a credible appraisal." The evidence at the hearing indicated that the before and after method is always used in partial taking cases and that Klein's failure to use it in this case led to errors that "substantially affected the credibility of his appraisal." Second, the judge's opinions and this Court's opinion regarding determination of just compensation are irrelevant to the question whether Klein violated USPAP standards. The Secretary did not err in rejecting Klein's argument that the trial court's statement obviated the requirement to use the before and after method.

[¶ 11.] Klein's next argument is that the Department erred in finding that he was incompetent to provide an appraisal. Klein notes his years of experience as an appraiser and argues the fact that he had never done a condemnation appraisal was insufficient...