SC Administrative Law Court Decisions

This matter comes before me for a contested case hearing pursuant to S.C. Code Ann. §§ 1-23-310, et seq. (Supp. 1995) and S.C. Code Ann. § 12-4-30(D) (Supp. 1995) on alleged administrative violations. The South Carolina Department of Revenue ("Department") alleges that on April 8, 1996, respondents violated S.C. Code Ann. § 12-21-2804(A) by maintaining more than five (5) Class III video game machines at a single place or premises. Specifically, the Department alleges violations of the "one separate employee" requirement of 27 S.C. Code Ann. Regs. 117 § 190 (Supp. 1995).

The Department seeks a $5,000 fine for the alleged violations of S.C. Code Ann. § 12-21-2804(A) (Supp. 1995), revocation of the fifteen video game machine licenses located at 1540 A, B, and C Broad River Road, Columbia, South Carolina on April 8, 1996, and preclusion of the issuance of video game machine licenses at the location for six months from the date of license revocation.

After notice to all parties, a hearing was held at the Administrative Law Judge Division in Columbia, South Carolina. The issues before this tribunal are (1) whether respondents violated S.C. Code Ann. § 12-21-2804(A) (Supp. 1995) and S.C. Code Regs. 117 § 190 and (2) if so, what are the proper penalties for such violations. Based upon the following Findings of Fact and Conclusions of Law, this tribunal concludes that respondents violated S.C. Code Ann. §§ 12-21-2804(A) (Supp. 1995) and that the penalties imposed by the Department shall be sustained.

FINDINGS OF FACT

1. The Department issued a Regulatory Violation and Proposed Assessment Report against J.K.S., Inc., on April 8, 1996. The Department alleged that J.K.S., Inc. violated S.C. Code Ann. § 12-21-2804(A) and S.C. Code Regs. 117 § 190 by permitting the use of more than five machines at a single place or premises. Specifically, the Department contends that the businesses known as Flamingo Video, Flamingo Food & Cigarettes, and Flamingo T-Shirts failed to "have at least one separate employee on the premises during business hours" at 1540 A, B, and C Broad River Road, Columbia, South Carolina.

2. The Department issued a Final Determination and Amendment of Violation on July 24, 1996.

3. On April 8, 1996, the following Class III video game machine licenses were affixed to machines in the respective businesses and held by the corresponding licensees:

Business Entity License Number Licensee

Flamingo Video 43779 J.K.S., Inc.

" " 43776 J.K.S., Inc.

" " 46414 Ashley Ingram

" " 46421 Ashley Ingram

" " 46419 Ashley Ingram

Flamingo Food & Cigs. 46304 J.K.S., Inc.

" " 46423 Ashley Ingram

" " 46658 Jack Tatum

" " 46413 Ashley Ingram

" " 46659 Jack Tatum

Flamingo T-Shirts 46649 Jack Tatum

" " 46442 Joe DeFranic

" " 46609 J.K.S., Inc.

" " 43777 J.K.S., Inc.

" " 43778 J.K.S., Inc.

4. At the time of the Department's inspection of the subject location, the lights were on and all internal doors to the respective businesses were open. Each of the respective entities were open for business. In fact, a customer was operating a machine in Flamingo Video and in Flamingo Food & Cigarettes.

5. At the time of the Department's inspection, Chris Spears, an employee, was located in the common area of the subject location. Mr. Spears was responsible for attending Flamingo Food & Cigarettes.

6. On April 1, 1996, prior to the inspection which is the subject of this case, the Department issued a "warning" Regulatory Violation and Proposed Assessment Report to Flamingo Video, Inc. and J.K.S., Inc. for the subject location at 1540 Broad River Road, Columbia, South Carolina. The report cited Flamingo, Inc. and J.K.S., Inc. with operating three video game machine businesses with one employee. Jack Tatum received the report as evidenced by his signature thereto and as indicated by the testimony of Revenue Officer Donald Frick.

7. Jack Tatum is the president of J.K.S., Inc. See Plaintiff's Exhibit #6. Further, the evidence indicates that Mr. Tatum has management responsibilities in the respective businesses.

8. During the course of the inspection, Ann Tatum arrived. She is the wife of Jack Tatum and is also an employee. Jack Tatum also arrived separately with a third employee.

9. The Department seeks revocation of all the Class III licenses located on the subject location on April 8, 1996, preclusion of the issuance of Class III licenses at the subject location for six months from the date of revocation of the licenses, and the imposition of a $5,000 fine against J.K.S., Inc.

CONCLUSIONS OF LAW AND ANALYSIS

A. Jurisdiction

1. Pursuant to S.C. Code Ann. § 12-4-30(D) (Supp. 1995) and S.C. Code Ann. § 1-23-320 (Supp. 1995), the Administrative Law Judge Division has jurisdiction to hear this matter.

B. Violation

2. Respondents are licensees or operators of video game machines licensed under S.C. Code Ann. § 12-21-2720(A)(3) (Supp. 1995).

3. The Video Game Machines Act ("Act"), which regulates video game machine activity in South Carolina, was enacted in 1993 and became effective on July 1, 1993. This Act is found at S.C. Code Ann. § 12-21-2770, et seq. (Supp. 1995). The purpose of the Act is to regulate the video game machines industry and to prevent large-scale casino type gambling operations in the State of South Carolina. See 1994 Op. Atty. Gen. No. 94-21 at 51; Reyelt v. S.C. Tax Comm'n, 6:93-1491-3 and 6:93-1493-3 (U.S. Dist. Ct., Greenville, S.C., Nov. 15, 1993).

4. Petitioner alleges that on April 8, 1996, respondents violated S.C. Code Ann. § 12-21-2804(A) and 27 S.C. Code Regs. 117 § 190 (Supp. 1995) by permitting licenses to be used for the operation of more than five (5) Class III video game machines at a single place or premises. Section 12-21-2804(A) provides:

No person shall apply for, receive, maintain, or permit to be used, and the commission shall not allow to be maintained, permits or licenses for the operation of more than eight machines authorized under Section 12-21-2720(A)(3) at a single place or premises for the period beginning July 1, 1993, and ending July 1, 1994. After July 1, 1994, the commission may not issue nor authorize to be maintained any licenses or permits for more than five machines authorized under S.C. Code Ann. § 12-21-2720(A) (3) at a single place or premises . . . . (emphasis added).

5. On June 23, 1995, regulations were promulgated which further clarify the provisions of the Video Game Machines Act and, as such, these regulations have the force and effect of law. See Faile v. S.C. Employment Sec. Comm'n, 267 S.C. 536, 230 S.E.2d 219 (1976); Young v. S.C. Dep't of Highways and Pub. Transp., 287 S.C. 108, 336 S.E.2d 879 (1985). Specifically, 27 S.C. Code Regs. 117 § 190 was promulgated to clarify the meaning of the phrase "single place or premises" as set forth in Section 12-21-2804(A). This regulation, effective June 23, 1995, provides in relevant part:

A "single place" or "premises" means a structure surrounded by exterior walls or firewalls 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 firewalls 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 firewalls 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 a separate state sales tax license?

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.

S.C. Code Regs. 117 § 190 (1995) (emphasis added).

6. The primary issue before this tribunal is whether any person "permitted" the use of permits or licenses for the operation of more than five Class III video game machines at a single place or premises, in violation of S.C. Code Ann. § 12-21-2804(A) and 27 S.C. Code Regs. 117 § 190.

7. It is well established that in interpreting a statute, the court's primary function is to ascertain the intention of the legislature. State v. Blackmon, 304 S.C. 270, 403 S.E.2d 660 (1991); First South Savings Bank, Inc. v. Gold Coast Assoc., 301 S.C. 158, 390 S.E.2d 486 (Ct. App. 1990); State v. Harris, 268 S.C. 117, 232 S.E.2d 231 (1977). In ascertaining the intent of the legislature, a court should not focus on any single section or provision but should consider the language of the statute as a whole. Creech v. S.C. Public Service Authority, 200 S.C. 127, 20 S.E.2d 645 (1942). Furthermore, in construing statutes, the language used should be given its plain and ordinary meaning without resort to subtle or forced construction to limit or expand the statute's operation. Bryant v. City of Charleston, 295 S.C. 408, 368 S.E.2d 899 (1988); Home Health Service v. S.C. Tax Comm'n, 312 S.C. 324, 440 S.E.2d 375 (1994). Where terms of a statute are clear and unambiguous, they must be applied according to their literal meaning. Medlock v. 1985 Ford F-150 Pick Up, et al., 308 S.C. 68, 417 S.E.2d 85 (1992); Green v. Zimmerman, 269 S.C. 535, 238 S.E.2d 323 (1977). "A statute should be so construed that no word, clause, sentence, provision or part shall be rendered surplusage, or superfluous . . . ." 82 C.J.S. Statutes § 346; Savannah Bank and Trust Co. of Savannah v. Shuman, 250 S.C. 344, 157 S.E.2d 864 (1967). This tribunal has no legislative powers, and the justice or wisdom of statutes rests exclusively with the General Assembly. See Smith v. Wallace, 295 S.C. 448, 369 S.E.2d 657 (Ct. App. 1988).

8. The facts of this case clearly indicate that there were five (5) operational Class III video game machines located in each of the three businesses during business hours. More specifically, on the date of inspection the facts were as follows: the doors to each room containing video game machines were open; and, the lights were on inside each of these rooms. Further, there was only one employee at the entire location, who was located in the common area. There were no employees in any of the businesses in which the video game machines were located. Further, a customer was present in two of the three rooms.

9. Whether an establishment is being operated as a "single place or premises" is determined by evaluating the facts against the standard set forth in Regulation 117 § 190. With respect to the "employee" requirement, Regulation 117 § 190 requires that each entity or business have at least one separate employee on the premises of that respective entity or business during business hours to comply with the "single place or premises" requirements of Section 12-21-2804(A). If a game room containing operational Class III video game machines is accessible to customers and no employee is present in that room, the room is being operated in violation of Section 12-21-2804(A). An employee working in a common area or anywhere else outside the game room is not considered to be "on the premises" of the game room. See S.C. Dep't of Revenue and Taxation v. Mickey Stacks, 95-ALJ-17-0742-CC (March 8, 1996). This application is consistent with the intent of the General Assembly to prevent large-scale casino type gambling. See Singletary v. S.C. Dep't of Educ., 316 S.C. 153, 447 S.E.2d 231 (Ct. App. 1994), citing State v. Thrift, 312 S.C. 282, 440 S.E.2d 341 (1994) (legislative intent must prevail if it can be reasonably discovered and language of a statute must be construed in the light of the intended purpose of the statute). In the instant case, the uncontroverted evidence indicates that there was only one employee in the common area at the time of the inspection, and no employees were working in the game rooms. Furthermore, the evidence indicates that the businesses were open for business at the time of inspection. Thus, I conclude that the businesses located at 1540 A, B, and C Broad River Road, Columbia, South Carolina have violated Section 12-21-2804(A) by permitting licenses to be used for the operation of more than five Class III video game machines in a single place or premises. Consequently, respondents' Class III licenses are subject to revocation.

C. Penalty

13. S.C. Code Ann. § 12-21-2804(A) (Supp. 1995) expressly authorizes the "commission" [Department] to enforce the provisions of this section and also requires the Department to revoke licenses utilized in a fashion that fails to comply with the provisions of this section. This section further provides: "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." The clear import of this language is to preclude an establishment which has had a license revoked from operating for a six month period. That is, the Department does not issue licenses for specific locations, but rather issues licenses to individuals. Therefore, licenses may be utilized by an operator at any, otherwise qualified, location in the state. Consequently, the above provision would be rendered meaningless if it were read not to require an establishment whose licenses have been revoked to cease operations for six months. See Singletary v. S.C. Dep't of Educ., 316 S.C. 153, 447 S.E.2d 231 (Ct. App. 1994), citing State v. Thrift, 312 S.C. 282, 440 S.E.2d 341 (1994) .

14. S.C. Code Ann. § 12-21-2804(F) (Supp. 1995) provides that a person who violates S.C. Code Ann. § 12-21-2804(A) (Supp. 1995) is subject to a fine of up to $5,000.

15. Generally, knowledge of or notice to an agent or officer of a corporation acquired in the ordinary discharge of his duties for the corporation is imputed to the corporation. See 19 C.J.S. Corporations § 632 at 282 (1990), see also Whitten v. Bob King's AMC/Jeep, Inc., 231 S.E.2d 891 (N.C. 1977); Employers' Fire Ins. Co. v. Pennsylvania Millers Mut. Ins. Co., 157 S.E.2d 807, appeal after remand 165 S.E.2d 309 (Ga. Ct. App. 1967).

ORDER

Based upon the foregoing Findings of Fact and Conclusions of Law, IT IS HEREBY ORDERED that a violation of S.C. Code Ann. § 12-21-2804(A) (Supp. 1995) mandates the revocation of the machine licenses in question, and subitem (F) of that section allows the imposition of a $5,000 fine for such a violation.

IT IS FURTHER ORDERED that the Department shall revoke the video game machine licenses located at 1540 A, B, and C Broad River Road on April 8, 1996 and no video game machine licenses shall be utilized at 1540 A, B, and C Broad River Road, Columbia, South Carolina for six months from the date of the revocation of the licenses referenced herein.

IT IS FURTHER ORDERED that the Department shall sustain the monetary fine imposed against J.K.S., Inc.

IT IS FURTHER ORDERED that respondents' motion to dismiss the citation issued by the Department is hereby denied. Further, according to ALJD Rule 29(B), issues raised in the proceedings, but not addressed in the Order are deemed denied.

AND IT IS SO ORDERED.

______________________________

JOHN D. GEATHERS

Administrative Law Judge

Post Office Box 11667

Columbia, South Carolina 29211-1667

March 6, 1997

Columbia, South Carolina