SC Administrative Law Court Decisions

This matter comes before me pursuant to S.C. Code Ann. § 12-4-30 (D)(Supp. 1995) and S.C. Code Ann. § 1-23-320, et seq. (Supp. 1995) pursuant to a request for a contested case hearing by Collins Entertainment, Inc., owner/licensee, and Yvette Allon & Allon Investments, Inc., (collectively referred to as "Respondent"). The South Carolina Department of Revenue ("Petitioner" or "Department") issued a citation against Respondent for alleged administrative violations of S.C. Code Ann. § 12-21-2804(A)(Supp. 1995) of the Video Game Machines Act ("Act") and S.C. Code Regs. 117-190 (Supp. 1995) ("Regulation") at the business located at 940 Lake Arrowhead Road, Myrtle Beach, South Carolina ("location"). Specifically, the Department alleges that Respondent did not have a separate employee within each of its four single places or premises ("game rooms") at the location during business hours on June 13, 1996. Respondent denies any violation of the Act or the Regulation.

The Petitioner seeks revocation of the twenty (20) Class III video poker licenses at the location, a $5,000.00 fine and an Order prohibiting the licensing, usage and placement of any Class III video poker licenses at the location for a period of six months from the date of the license revocation.

After timely notice to the parties, a contested case hearing was held at the Administrative Law Judge Division ("Division") offices, Columbia, South Carolina on February 3, 1997.

Based upon a thorough review of the record, post-hearing legal briefs, the relevant and probative evidence and applicable law as set forth hereafter, I conclude that the Respondent did not

violate S.C. Code Ann. §12-21-2804(A) or S.C. Code Regs. 117-190 on June 13, 1996 and that the citation against the Respondent should be dismissed.

ISSUES

1. Did Respondent violate the "single place" or "premises" provisions of S.C. Code Regs. 117-190 (Supp. 1996) and S. C. Code Ann. Section 12-21-2804(A) (Supp. 1996) by failing to have an employee within each of the four game rooms on June 13, 1996?

2. If there is a violation, what is the appropriate penalty?

EVIDENCE

Without objection, Petitioner placed into evidence the following exhibits:

Exhibit l: Form FS-31 (Rev. 11/95) Regulatory Violation and Proposed Assessment Report dated June 13, 1996.

Exhibit 2: Final Determination letter of the Department dated October 28, 1996.

Exhibit 3: Floor Plan/Drawing of the location showing the four separate businesses/game rooms, the rest rooms, the kitchen area and the common area consisting of the dining room and the bar.

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Exhibit 4: A listing of the retail license number for each of the four game rooms, the license on each video machine located within each of the four separate business locations,

and the owner of each of the video machines together with the name and social security number of the employee present in each game room on the date of the inspection.

Exhibit 5: Seven (7) photographs taken of the exterior and interior at the location.

Exhibit 6: Certified copies of Biennial Coin-Operated Device Applications by Yvette H. Allon and Collins Entertainment, Inc.

Exhibit 7: Certified copies of Forms SCTC-111 entitled "South Carolina Department of Revenue Business Tax Application" filed by the Respondent/Allon Investments, Allon Investments, Inc., and Yvette Allon with Petitioner for businesses using the trade names of Sunset Blvd., Diamond Blvd., and Lucky's Basket Case.

Revenue Officer Robert B. Gardner, Jr. testified on behalf of the Petitioner. Also, the Respondent, Yvette H. Allon testified as did Richard Troy Gentry of Shoreline Floor Covering of Myrtle Beach, South Carolina.

FINDINGS OF FACT

Having carefully considered all testimony and arguments presented at the hearing, taking into account the credibility of the one witness, the accuracy of the evidence and having reviewed all the exhibits carefully, I make the following findings by a preponderance of the evidence:

1. This Division has personal and subject matter jurisdiction.

2. Notice of the date, time, place and nature of the hearing was timely given to both parties.

3. Respondent/Allon Investments, Inc. owns and operates four separate video game businesses. They are known and operated as Diamond Blvd., Lucky Lady Blvd., Sunset Blvd., and Casablanca Blvd.

4. Each business operates within a separate room inside the building located at 940 Lake Arrowhead Road, Myrtle Beach, Horry County, South Carolina. Respondent/Allon Investments, Inc. also operates a restaurant at the location. See Petitioner's Exhibit 3.

5. Each of the four game rooms has five Class III video game machines located inside. The owner/licensee of the video game machines is Collins Entertainment, Inc.

6. Each of the four game rooms is surrounded by interior walls within the building which constitute exterior walls for purposes of each individual business. The only means of entry and exit to and from each game room is through the restaurant area.

7. The Lucky Lady Blvd. game room contains five Class III video game machines with the following license numbers: 035887, 035888, 3805586, 035949 and 035892. The biennial license numbers for the machines in the Casablanca Blvd. game room are: 036297, 036298, 036291, 036299, and 036300.

8. The Sunset Blvd. game room contains a total of five Class III video game machines with biennial license numbers: 035084, 035086, 035615, 035085, and 035616. The biennial license numbers for the machines in the Diamond Blvd. game room are: 036293, 036292, 036296, 036294, and 036295.

9. Each of the six game rooms or businesses has a separate State sales tax license and a separate electrical meter.

10. On June 13, 1996 , at approximately 1:25 P. M., Revenue Officer Robert B. Gardner, Jr. went to the location at 940 Lake Arrowhead Road, Myrtle Beach, Horry County, South Carolina. He observed two individuals sitting at a table in the dining room area. Also, he observed that the lights were on in each of the four game rooms, the doors were open to each room and the lights inside the video game machines were on. The video game machines "appeared operable" to him. He saw no employees inside any of the four game rooms. He does not recall if he saw any new carpet on the floor.

12. On the date of June 13, 1996 when Revenue Officer Gardner made the inspection, Mrs. Allon was working in the kitchen. One other employee was at the location. That employee was vacuuming and cleaning up inside the location.

13. Richard Troy Gentry of Shoreline Floor Covering laid new carpet and tile inside the entire location, including the four game rooms, between the hours of 11:00 a.m. until 11:00 p.m. on Wednesday, June 12, 1996 and 9:00 a.m. until 1:00 p.m. on Thursday, June 13, 1996. He finished the job and left the location a very short time prior to the arrival of Revenue Officer Gardner.

14. At the time the Revenue Officer made the inspection, the four game rooms were not open for business. There was no money in the cash registers. Mrs. Allon and a fellow employee were still cleaning up the mess from the carpet and tile instllation. The doors to the four rooms were open to allow them to air out and let the fumes from the glue escape. It was the intent of Mrs. Allon to open the game rooms for customer play at 2:00 p. m. that day.

15. The Department did not cite the Respondent for any violations concerning a failure to have separate electric meters or separate business licenses at any of the four game rooms.

16. As a result of the inspection on June 13, 1996, Revenue Officer Gardner issued a citation to Respondent for not having an employee present within the physical premises of each of the four game rooms or businesses.

17. I find that none of the four game rooms was open for business on June 13, 1996 when Revenue Office Gardner conducted his inspection at the location.

CONCLUSIONS OF LAW

Based on the foregoing Findings of Fact and Discussion, I conclude, as a matter of law, the following:

1. Pursuant to S.C. Code Ann. § 12-4-30 (D) (Supp. 1996) and Chapter 23 of the Title 1 of the 1976 Code, as amended, the South Carolina Administrative Law Judge Division has jurisdiction in this matter.

2. S.C. Code Ann. § 12-21-2804(A) (Supp. 1996) prohibits the operation of more than five video game machines authorized under S.C. Code Ann. § 12-21-2720(A)(3) at a "single place" or "premises".

3. Machines licensed pursuant to the provisions of S.C. Code Ann. § 12-21-2720(A)(3) include video games with free play feature operated by a slot in which a coin or thing of value is deposited. S.C. Code Ann. § 12-21-2720 (Supp. 1996).

4. Pursuant to S.C. Code Ann. § 12-21-2798 (Supp. 1996), the Department is authorized to promulgate regulations to assist in the administration and enforcement of the Video Game Machines Act.

5. S.C. Code Regs. 117-190 (Supp. 1996) defines "single place" or "premises" for purposes of interpreting the Video Game Machines Act, including § 12-21-2804(A). It provides as follows:

A "single place" or "premises" means a structure surrounded by exterior walls or fire walls consistent with the requirements of the applicable building code (or where no building code is applicable, a one hour rated firewall), provided such exterior walls and fire walls may not have any windows, doors or other openings leading to another area where video game machines are located.

If a structure surrounded by exterior walls has two or more areas where video game machines are located, each surrounded by exterior walls or fire walls as defined and required above, the Department must review all the facts and circumstances to determine if each area in reality constitutes a single place or premise for video game machines. In determining whether each entity is in fact a single place or premises, the Department of Revenue will consider the following factors: (1) Does each entity or business have a separate electric utility meter? (2) Does each entity or business have at least one separate employee on the premises during business hours? (3) Does each entity or business have a separate local business license where required? (4) Does each entity or business have separate sales tax licenses? A positive answer to these four questions is required for each area to be considered a "single place or premise" for purposes of the Video Game Machines Act.

6. The second criterion of Regs. 117-190 only requires that each separate game room have an employee working on the premises during business hours. There is no requirement that the employee remain within the four walls of the premises every minute he is on duty. An individual employed to work in a specific game room from time to time may stand outside. If he continues to observe the game room operation and remains in control of its operation, standing ready to assist in the totality of its operation, this criterion is complied with. In interpreting this regulation, the court must look to the purpose of the legislature in enacting § 12-21-2804(A) as a part of the Video Game Machines Act. Our courts have held that "all rules of statutory construction are subservient to the one that legislative intent must prevail if it can be reasonably discovered in the language used, and that language must be construed in the light of the intended purpose." Lewis v. Gaddy, 254 S.C. 66, 71, 173 S.E.2d 376, 378 (1970). Further, our Court has stated that "the language of a revenue statute must not be extended beyond its clear import, the taxpayer being entitled to favorable resolution of any substantial doubt arising therefrom." Deering Milliken, Inc. v. S.C. Tax Comm'n, 257 S.C. 185, 187-88, 184 S.E.2d 711 (1971). Further, our Court has stated the rule that "The legislature must have intended to mean what it has plainly expressed, and consequently there is no room for construction...." Beaty v. Richardson, 56 S.C. 173, 34 S.E. 73 (1899).

The purpose of the Video Game Machines Act is to prevent large-scale casino type gambling operations in the State of South Carolina. Its intent is to limit five machines to each single place or business. The Department has promulgated Regs. 117-190 to clarify the statute and to assist in its implementation. It has not and can not add to or alter the statute. Society of Professional Journalists v. Sexton, 283 S.C. 563, 324 S.E.2d 313 (1984). The interpretation of the statute by the Department that a business entity must have an employee within the four walls of the business premises at all times adds to and alters the statute. Criterion # (2) is reasonable in its interpretation and application only to the extent that it requires the employment of an individual at each place or business during working hours but not to the extent it requires the employee to remain with the confines of the business at all times.

7. In this case, the evidence was uncontroverted that there were only two employees at the location. However, the facts show that the game rooms were not open for business. Although the Department showed that the machines were plugged in and, were thus possibly available for play, Respondent demonstrated to the court that the rooms were only open for purposes of allowing the smell of glue to escape. Further, it was the testimony of Respondent that the machines stayed on twenty-four hours every day, which would include the hours when the entire location was closed. The evidence adduced by the Department is circumstantial and is overcome with the explanations of Respondent as corroborated by the carpet and tile installer. The fact that the machines were plugged in and were available for play does not mean that the game rooms were open to customers. I conclude that the Respondent has not violated the "single place" or "premises" requirements of S.C. Code Ann. § 12-21-2804(A) or Reg. 117-190.

8. A person found to have violated S.C. Code Ann. § 12-21-2804(A) (Supp. 1996) is subject to a fine of up to Five Thousand and no/100 ($5,000.00) Dollars and automatic revocation of the licenses of machines located in the establishment. Additionally, no license may be issued for a machine in an establishment in which a license has been revoked for a period of six months from the date of revocation. However, I find that no violation occurred on June 13, 1996.

9. Acting as fact-finder, it is the administrative law judge's prerogative "to impose the appropriate penalty based on the facts presented." Walker v. South Carolina ABC Comm'n, 305 S.C. 209, 407 S.E.2d 633, 634 (1991). If an the administrative law judge finds and concludes that a violation has occurred, then he has the authority to establish the monetary fine within the allowable range provided for by S.C. Code Ann. § 12-21-2804(A) (Supp. 1996). S.C. Code Ann. § 12-4-30(D) (Supp. 1996).

10. An administrative law judge possesses the same powers at chambers or in open court as do circuit court judges and may issue such remedial writs as are necessary to give effect to its jurisdiction. S.C. Code Ann. § 1-23-630 (Supp. 1996).

ORDER

Based upon the foregoing Findings of Fact, Discussion and Conclusions of Law, it is hereby:

ORDERED that the violation(s) pending against the Respondents are dismissed,with prejudice.

AND IT IS SO ORDERED.

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Marvin F. Kittrell

Chief Judge

Columbia, South Carolina

April 7, 1997