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2008-UP-330 - Hospital Land Partners v. SCDHEC

THIS OPINION HAS NO PRECEDENTIAL VALUE.  IT SHOULD NOT BE CITED OR RELIED ON AS PRECEDENT IN ANY PROCEEDING EXCEPT AS PROVIDED BY RULE 239(d)(2), SCACR.

THE STATE OF SOUTH CAROLINA
In The Court of Appeals

Hospital Land Partners, LLC, Appellant,

v.

South Carolina Department of Health and Environmental Control, Office of Ocean and Coastal Resource Management, Respondent.


Hall Development, Glenn Hall, Carl Hyszczak, Irene Hyszczak, June Darville, Charles Darville, Rose Suess, Carl Suess, George Pendleton, Carl Franklin, Mildred Borbet, Gladys Bride, John Bride, D. C. Abernethy, Leo Wever, Richard Smith, Donald Joy, Joan Joy, Renzo Falcinelli, Nancy Falcinelli, Joyce Utt, Boyd Parker, Anne Parker, Alfred Robertson, Ronald Longnecker, Bonnie Longnecker, William Besemer, Lee Besemer, Richard Geller, John Shaw, Norman Heindel, Stan Petroski, Patricia Hosford, and Leo Reddan, Respondents,

v.

South Carolina Department of Health and Environmental Control, Office of Ocean and Coastal Resource Management, and Hospital Land Partners, LLC

of which DHEC-OCRM is a Respondent

and

HLP is the Appellant.


Appeal From Horry County
 J. Stanton Cross, Jr., Circuit Court Judge


Unpublished Opinion No.  2008-UP-330
Heard May 6, 2008 – Filed July 1, 2008
Withdrawn, Substituted and Refiled September 23, 2008


REVERSED IN PART AND VACATED IN PART


Leon Carroll Harmon, of Greenville, for Appellant.

Carlisle  Roberts, Jr., of Columbia, Cotton C. Harness, III, of Mt. Pleasant, Evander  Whitehead, of Charleston, James S. Chandler, Jr., of Pawleys Island, for Respondents.

PER CURIAM:  This action involves Hospital Land Partners’ (HLP’s) application to obtain a stormwater management permit to allow for development of land set aside as a mitigation site for previous development.  We reverse in part, and vacate in part.  

FACTUAL/PROCEDURAL BACKGROUND

HLP owns an 8.55 acre parcel of property (the Property) near Conway, South Carolina.  The Property was once part of a larger tract owned by International Paper known as Southbridge.  In the early 1980’s, International Paper entered into an agreement with Glenn Hall for development of the property.  Pursuant to the agreement, Hall Development would develop the property and then purchase the lots from International Paper as the lots were finished.  Hall Development was responsible for obtaining state, local, and federal permits.  It obtained a permit from the U.S. Army Corp of Engineers and a coastal zone consistency certification from the State of South Carolina, through the South Carolina Coastal Council, which was the predecessor to the Department of Health and Environmental Control’s (DHEC’s) Office of Ocean and Coastal Resource Management (OCRM).  Hall Development was allowed to fill three wetland areas, totaling 1.029 acres for Section VIII of Myrtle Trace Subdivision and dredge another area to make a lake.  As mitigation for this, Hall Development was to protect another wetland area consisting of 4.689 acres and establish a buffer around the wetlands.  The total mitigation site was 8.337 acres.  No conservation easement or restrictive covenants were placed on the Property, which remained titled to International Paper.  At the time, the policies of the Army Corps of Engineers and the Coastal Council did not include the requirement that a permittee record restrictive covenants and/or conservation easements to protect wetlands, wetland buffers, and land provided in mitigation. 

The members of HLP, Thomas Roe and Dr. Michael Hodge, became interested in the Property in late 1996 or early 1997.  Thomas Roe met with Allen Moore, an employee of International Paper in charge of the real estate portfolio, regarding the availability of the Property.  Moore told Roe that the Property was available but “messed up.”  Moore testified he told Roe that the Property had potential problems with a Corps of Engineers permit.  A partnership formed by Roe and Hodge, Hodge-Roe General Partnership, entered into an option agreement with International Paper to purchase the Property for $225,000.  The partnership paid only $10.00 for the option.  The attorney who conducted the title examination did not find any problems with the Property, other than a deed to the South Carolina Department of Transportation.  This matter was resolved.  The Partnership also commissioned a wetland redelineation to be conducted by the Brigman Company, which had also conducted the earlier wetlands delineation for Hall Development.  The delineation, which was approved by the Corps of Engineers and verified by OCRM, showed that less than 0.8 acres of wetlands remained on the site.  The reduction possibly resulted from a combination of factors, including changed Corps wetland delineation guidelines, the excavation of the adjacent wetland, and the creation of the drainage canal constructed earlier between the Property and Myrtle Trace. 

The Partnership purchased the Property on December 12, 1997 and subsequently deeded it to HLP.  The timber on the Property was harvested in April of 1998.  The residents of Myrtle Trace and Glenn Hall objected to any development of the Property.  When HLP applied to have the Property rezoned, the Horry County Planning Commission required HLP to obtain a letter from the Corps of Engineers concerning the status of the Property as a mitigation site.  The Corps responded that although the property was offered as mitigation for a permit, there were no easements or covenants in its records and HLP could proceed with any work in areas not designated as jurisdictional in the delineation.  OCRM refused to issue a similar letter because the Property had been offered by Hall Development as mitigation for wetlands filled by it. 

On July 7, 1999, HLP submitted an application to OCRM seeking a stormwater management and sediment control permit as required by the Stormwater Management and Sediment Reduction Act.  See S.C. Code Ann. § 48-14-30(A) (2008) (“Unless exempted, no person may engage in a land disturbing activity without first submitting a stormwater management and sediment control plan to the appropriate implementing agency and obtaining a permit to proceed.”).  As part of this permitting process, OCRM was to ensure the proposed project, located in a coastal zone, was consistent with the policies of the Coastal Management Program managed by DHEC.  See S.C. Code Ann. § 48-39-80(B)(11) (2008) (authorizing DHEC to develop a plan to review all state and federal permit applications in the coastal zone, and to certify that these do not contravene the management plan).  In the application, HLP sought approval of a plan to disturb 7.77 acres of land for construction of a residential care facility.  Although the application indicated that no wetlands would be disturbed, the area disturbed would include the mitigation site.  In a letter dated September 27, 1999, OCRM informed HLP that the project was inconsistent with the Coastal Zone Management Program.  However, the letter set forth several conditions that, if accomplished, would bring the project into consistency.  These conditions were that HLP was to:

a. Provide for a buffer around the wetlands on the HLP property and adjacent tract, which is adjacent to the southern property line of the HLP property; 

b. Redirect storm water runoff at several locations into the wetlands;

c. Replant vegetation to replace the vegetation that was cleared.  This was to re-establish the natural screen between the wetland and the upland area; 

d. Purchase credits in an off-site mitigation bank, in order to mitigate for the difference in the amount of wetlands that were delineated in 1991 and the current amount.  The credits would be no more than $20,000; 

e. Formally preserve all of the wetlands and buffers in the area with a standard deed restriction.[1] 

HLP appealed to the Administrative Law Judge (ALJ), contesting OCRM’s requirements.  In addition, Hall Development and Glenn Hall (collectively Hall) and residents of Myrtle Trace appealed to the ALJ contesting the project’s consistency with the Coastal Zone Management Act, Coastal Zone Management Program Document, and the South Carolina Stormwater and Sedimentation Reduction Act.  The appeals were consolidated for one hearing.  On the second day of the hearing, HLP withdrew its claims of lack of authority by OCRM to require the conditions and agreed to all of the conditions set forth in OCRM’s letter. 

The ALJ noted OCRM has significant discretion in any decision to grant or deny a coastal zone permit.  He concluded that the buffers and the purchase of credits in a mitigation bank to mitigate for the loss of wetlands that has occurred over time comply with the requirements of the Coastal Zone Management Program.  He rejected Hall and the Residents’ res judicata argument, finding the loss of wetlands on the property presented a change in circumstances not contemplated by OCRM in its original certification determination.  He found OCRM’s proposed mitigation plan would protect the remaining wetlands more effectively than preservation of the status quo.  The ALJ ordered HLP to submit a stormwater management plan that incorporates the conditions listed in OCRM’s September letter. 

Hall and the Residents appealed to the DHEC Board.  The DHEC Board initially rejected the ALJ’s findings of fact and made its own findings.  It reversed the decision of the ALJ and denied HLP’s application for a storm water and sediment control permit.  HLP appealed to the circuit court, which vacated the decision of the DHEC Board for making its own findings of fact.[2]  After the remand, the DHEC Board found the Coastal Zone Management Program certification of Phase VIII of the Myrtle Trace development, which required the setting aside and protection of the buffer area as mitigation, constituted a final agency action.  It held that “[o]nly in extraordinary cases can the terms and conditions of a final [Coastal Zone Management Program] certification be rescinded.  This is clearly not one of those cases.”  It held that the effect of the ALJ order would be to allow development of the buffer area previously set aside as mitigation and this constituted an error of law.  It affirmed the ALJ’s findings of fact but reversed as to its conclusions of law.  Thus, it denied HLP’s application for a permit. 

HLP appealed to the circuit court.  The court summarized the testimony presented at the hearing before the ALJ.  It held that the DHEC Board’s decision that once a piece of land is set aside as mitigation, it must stay set aside in the absence of extraordinary circumstances was squarely a ruling of law.  It concluded the Board’s ruling on this question of law had legal and factual support.  In affirming the Board’s order, the circuit court also addressed several additional sustaining grounds.  The court subsequently denied HLP’s motion to alter or amend.  This appeal followed. 

STANDARD OF REVIEW

Under the APA (Administrative Procedures Act), the Administrative Law Judge presides as the fact finder.  See S.C. Code Ann. § 1-23-600(B) (2005); [3] Brown v. S.C. Dep’t of Health & Envtl. Control, 348 S.C. 507, 520, 560 S.E.2d 410, 417 (2002).  In reviewing the final decision of the ALJ, the DHEC Board sat as a quasi-judicial tribunal and was not entitled to make findings of fact.  Brown, 348 S.C. at 520, 560 S.E.2d at 417.  The DHEC Board can only reverse the ALJ based on an error of law or if his findings are not supported by substantial evidence.  See Dorman v. S.C. Dep’t of Health & Envtl. Control, 350 S.C. 159, 165, 565 S.E.2d 119, 122 (Ct. App. 2002).  The circuit court’s review is the same as this court’s.  It may reverse a decision of an administrative agency if the agency’s findings or conclusions are:

(a) in violation of constitutional or statutory provisions; 

(b) in excess of the statutory authority of the agency; 

(c) made upon unlawful procedure; 

(d) affected by other error of law; 

(e) clearly erroneous in view of the reliable, probative and substantial evidence on the whole record;  or

(f) arbitrary or capricious or characterized by abuse of discretion or clearly unwarranted exercise of discretion. 

S.C. Code Ann. § 1-23-380(A)(6) (2005).

“In determining whether the ALJ’s decision was supported by substantial evidence, this court need only find, looking at the entire record on appeal, evidence from which reasonable minds could reach the same conclusion that the administrative agency reached.”  DuRant v. S.C. Dep’t of Health & Envtl. Control, 361 S.C. 416, 420, 604 S.E.2d 704, 706 (Ct. App. 2004).  “The mere possibility of drawing two inconsistent conclusions from the evidence does not prevent a finding from being supported by substantial evidence.”  Id. at 420, 604 S.E.2d at 707.

DISCUSSION

1.  Permit Application

HLP argues the DHEC Board’s order and the circuit court’s order are erroneous as a matter of law.  We agree. 

The DHEC Board ruled, “Only in extraordinary cases can the terms and conditions of a final CZMP certification be rescinded.”  It concluded this case did not meet that criteria.  DHEC is the agency in charge of enforcing and administering the provisions of the Coastal Zone Management Act and the rules and regulations promulgated under it.  S.C. Code §48-39-50 (2008).  In addition, DHEC is charged with the development of a comprehensive coastal management program and the enforcement and administration of this program.  S.C. Code § 48-39-80 (2008).  Its interpretation of these statutes and regulations is given great deference by the courts.  See Dunton v. S.C. Bd. of Exam’rs in Optometry, 291 S.C. 221, 223, 353 S.E.2d 132, 133 (1987) (“[T]he construction of a statute by the agency charged with its administration will be accorded the most respectful consideration and will not be overruled absent compelling reasons.”).  In the present case, however, neither the statutes nor the regulations promulgated thereunder set forth a requirement of an extraordinary case in order for a prior mitigation site to be modified.  The DHEC Board cannot create a new test by way of quasi-judicial order, but rather must promulgate such a test by regulation.  See Captain’s Quarters Motor Inn v. S.C. Coastal Council, 306 S.C. 488, 491, 413 S.E.2d 13, 14 (1991) (holding OCRM’s predecessor, the South Carolina Coastal Council, overstepped its statutory authority in formulating and applying a damage assessment test for purposes of permit evaluations without formalizing it by regulation). 

Hall and the Residents assert that under the Coastal Zone Management Program Document, once a permit is issued, OCRM may not take any inconsistent action.  It asserts OCRM could not modify the original certification.  This provision actually provides, “In those instances where more than one permit is required for a project, as long as no components of the project change, the Department will only place the first permit received on public notice.  The Department will take identical action on all sequential permits.”  The provision simply allows that once OCRM determines a project is consistent with the Coastal Zone Management Program and issues the first permit, it will do the same with subsequent permits for the same project.  Thus, it could not grant one permit and then deny a subsequent permit for the same project. 

The instant case involves a permit application for an entirely different project than the development of Myrtle Trace in which the original mitigation site was set aside.  It does not involve the rescission of the original Coastal Zone Management Program certification; rather it simply allows a release of an area that was required to be set-aside as a mitigation site.  We find the above provision inapplicable to the present case. 

We conclude the DHEC Board erred as a matter of law in creating a test not set forth in statute or regulation.  Therefore, we must affirm the ALJ’s findings and conclusion that HLP’s project was consistent if there is substantial evidence in the record to support the decision.  See S.C. Code Ann. § 1-23-380(A)(6) (2005).

The General Assembly mandated the specific state policy to be followed in the implementation of the Coastal Zone Management Act is:

[t]o promote economic and social improvement of the citizens of this State and to encourage development of coastal resources in order to achieve such improvement with due consideration for the environment and within the framework of a coastal planning program that is designed to protect the sensitive and fragile areas from inappropriate development and provide adequate environmental safeguards with respect to the construction of facilities in the critical areas of the coastal zone . . . .

S.C. Code Ann. § 48-39-30(B)(1) (2008). 

In furtherance of this policy, the General Assembly set forth considerations in the approval or denial of a permit, which include:

(7) The extent of the economic benefits as compared with the benefits from preservation of an area in its unaltered state.
(8) The extent of any adverse environmental impact which cannot be avoided by reasonable safeguards.
(10) The extent to which the proposed use could affect the value and enjoyment of adjacent owners.

S. C. Code Ann. § 48-39-150 (2008). 

In addition, OCRM’s Coastal Zone Management Program Document provides additional guidelines for evaluating projects, including “the extent to which the project includes consideration for the maintenance or improvement of the economic stability of the coastal communities,” and the “possible long-range, cumulative effects of the project, when reviewed in the context of other possible development and the general character of the area.” 

The ALJ considered these factors in concluding that OCRM adequately evaluated the project and correctly found that the project, as revised, was consistent with the Coastal Zone Management Program.  Robert Mikell, manager of federal certification for OCRM, testified that if HLP made the changes set forth in the September of 1999 letter, the project would be in compliance with the Coastal Zone Management Program.  The amount of wetlands on the Property significantly decreased since the Property was originally set aside as a mitigation site.  This decrease, due in part to the lake and canal constructed in Myrtle Trace, happened before HLP purchased the property.  Mikell stated that the HLP project does not directly impact the remaining wetlands on the Property as they will not be filled, excavated, or dredged. 

The ALJ also considered the modifications OCRM required in its September of 1999 letter.  The first requirement set forth in the letter is buffering.  Although OCRM’s Coastal Zone Management Program document suggests that commercial buffers should be at least an average of 50 feet, OCRM allowed a buffer of an average of 32 feet for this project.  Mikell testified that a 32-foot buffer can be acceptable depending on the area that is being buffered, the size of the wetland, the type of development, the site plan, and the fact that the project does not impact wetlands.  The ALJ concluded the buffer in place was adequate of function as intended.  There is substantial evidence to support this finding.  

The next requirement was altering the stormwater plan to show runoff being routed to the wetland system from several points.  Mikell stated that by redirecting the water, the wetlands were not likely to further retreat and would either stay the same or perhaps increase. 

The third requirement was replanting the wetland/buffer area to improve the screening features adjacent to the wetlands.  This screening will benefit the adjacent property owners and will grow over the years. 

The fourth requirement was HLP would purchase credits at an approved mitigation bank a sum to compensate for lost wetlands and buffer area.  Mikell calculated the payment would be approximately $20,000.  OCRM’s mitigation guidelines allow for off-site mitigation “if the mitigation will provide significant ecological benefit to the State of South Carolina.”  Mikell testified that the mitigation banks to which HLP is required to purchase credits are all located in areas that the state have deemed worthy of being restored.  Thus, in his opinion, all of the banks have been identified as being of ecological benefit to the State. 

The final requirement was that the wetlands and buffers must be preserved using standard deed restrictions.  This requirement eliminates any uncertainty in the protection of the remaining wetlands. 

The ALJ held, “OCRM’s proposed mitigation plan would protect the remaining wetlands more effectively than preservation of the status quo. . . .  Given that the topography of the wetlands [has] changed since 1989, OCRM’s proposed mitigation plan appropriately alters the status of the property upon reassessment of its physical characteristics.”  We hold there is substantial evidence in the record to support this finding

The ALJ also considered the Residents’ argument concerning diminution of property values.  A property owner is competent to testify as to the value of his property.  Hawkins v. Greenwood Dev. Corp., 328 S.C. 585, 594-95, 493 S.E.2d 875, 880 (Ct. App. 1997).  However, Myrtle Trace property owner Renzo Falcinelli only testified he believed his property value had gone down.  Neither he nor any other Resident provided actual evidence of the amount of a decrease in value.  They failed to offer evidence of sales of similar property showing the presence of a similar project in the coastal zone had materially and negatively impacted the value of adjacent owner’s property.  Falcinelli also testified about his loss of enjoyment of the use of his property due to the harvesting of the trees.  OCRM’s requirement for replanting the buffer area should help restore the screening and alleviate some of his and the other owner’s concerns. 

The ALJ addressed Hall and Residents’ argument that the project is not consistent with the Coastal Zone Management Program because zoning approval has not been obtained.  As the ALJ noted, zoning compliance is just one of many factors set forth in the Coastal Zone Management Program Document for OCRM to consider.  Here, the local zoning authorities deferred action on HLP’s rezoning request until HLP could receive clearance from OCRM to deviate from the previous buffer requirements.  We agree with the ALJ that the absence of zoning approval in this case did not render the project inconsistent with the Coastal Zone Management Program. 

The Coastal Zone Management Act and OCRM’s Coastal Zone Management Program Document set forth the considerations to be utilized in achieving the state’s policy of balancing economic development and preservation of the environment.  Achieving this balance requires flexibility and contemplation of the actual circumstances involved in each project’s permit application.  OCRM has allowed modification in other plans according to Mikell.  In this case, the wetlands on the area diminished significantly.  The current plan will allow for preservation of the remaining wetlands and in addition will provide for payment into the mitigation bank to allow for restoration and preservation of an area in need.  Accordingly, we find substantial evidence supports the ALJ’s decision a stormwater management plan that incorporates the requirements in OCRM’s September, 1999 letter is consistent with the Coastal Zone Management Program. 

2.  Additional sustaining grounds

The circuit court ruled as an additional sustaining ground that the ALJ erred by refusing to consider fundamental principles of property law.  The court held that Roe had constructive and actual knowledge of the mitigation requirements prior to HLP’s acquisition of the property.  However, the ALJ never held HLP was not bound by the prior mitigation restrictions.  In fact, OCRM’s position was that the mitigation restrictions were in place and binding on HLP.  The requirement that HLP purchase credits in an off-site mitigation bank was to mitigate for the difference in the amount of wetlands in the original delineation and the current amount.  Although HLP initially contested OCRM’s additional conditions, it later agreed to them and its notice of the mitigation site was not an issue. 

The circuit court also held the ALJ ignored the equitable, economic, and property interests of Hall and the Myrtle Trace residents.  As stated above, the extent to which the project affects the value and enjoyment of adjacent owners was a factor considered by the ALJ in determining whether the project was consistent with the Coastal Zone Management Program.  As we found above, the ALJ’s finding of consistency is supported by substantial evidence. 

To the extent the circuit court relied on other aspects of property law, we vacate these rulings.  The sole issue in this case is whether the HLP project is consistent with the Coastal Zone Management Program in order that HLP may receive a Stormwater permit to proceed with the project.  As the ALJ stated, any issues relating to real property law should be resolved in another forum. 

As another additional sustaining ground, the circuit court held the ALJ erred by turning a mere settlement proposal into a final staff decision.  OCRM’s September of 1999 letter set forth the requirements that must be included in a revision of HLP’s plans for the project.  Although the letter termed it a “mitigation settlement plan,” HLP was entitled to seek an administrative hearing on this matter.  See 26 S.C. Code Ann. Regs. 72-313(A)(5) (Supp. 2007) (stating an administrative hearing is available to determine the propriety of the requirements imposed by the implementing agency for approval of the stormwater management and sediment reduction plan).  At this administrative hearing, Hall and the Residents were allowed to present their opposition to the project and were given an opportunity to be heard on the consistency of OCRM’s proposed mitigation plan with the Coastal Zone Management Program in a contested case proceeding.  We find the circuit court’s ruling was in error.  

CONCLUSION

We REVERSE the circuit court’s affirmance of the DHEC Board’s denial of HLP’s permit application and reinstate the order of the ALJ allowing HLP to resubmit a stormwater plan including OCRM’s additional conditions.  In addition, we VACATE the circuit court’s rulings on property law issues. 

REVERSED IN PART; VACATED IN PART.

ANDERSON, HUFF, and KITTREDGE, JJ., concur.


[1] OCRM also required HLP to raise the outfall structure that is located adjacent to the canal in the Myrtle Trace Subdivision.  However, further review indicated this may cause flooding and OCRM withdrew this condition. 

[2] During the pendency of the initial appeal to circuit court, the supreme court had issued an opinion restricting the Board’s authority to make findings of fact.  See Brown v. S.C. Dep’t of Health & Envtl. Control, 348 S.C. 507, 560 S.E.2d 410 (2002). 

[3]This case progressed under the procedures in place prior to 2006 revision of the Administrative Procedures Act, which omitted the appeals to the DHEC Board and the circuit court.  See Act. No. 387, 2006 S.C. Acts 3093, 3098-3103.  All citations are to the former versions of the statutes found in the 2005 bound volume.