SC Administrative Law Court Decisions

STATEMENT OF THE CASE

This matter is before this tribunal for a contested case hearing pursuant to S.C. Code Ann. §§ 1-23-310, et seq. (Supp. 1997) and S.C. Code Ann. § 12-4-30(D) (Supp. 1997) on alleged administrative violations. The South Carolina Department of Revenue alleges that on April 26, 1996, Respondent violated S.C. Code Ann. § 12-21-2720(C) by failing to purchase a separate license for each station of a multi-player coin-operated device subject to licensing under S.C. Code Ann. § 12-21-2720(A)(3) (Supp. 1997). For the alleged violations of § 12-21-2720(C), the Department seeks a $10,000 fine against Respondent ($2,500 for each station not licensed).

The hearing of this matter was held on September 30, 1998. The issues before this tribunal are (1) whether Respondent violated S.C. Code Ann. § 12-21-2720(C) (Supp. 1997) and, (2) if so, what is the proper penalty for the violations. Based upon the following Findings of Fact and Conclusions of Law, this tribunal concludes that Respondent violated S.C. Code Ann. § 12-21-2720(C) by failing to purchase licenses for four stations of a five-station Blackjack machine in contravention of the law. Consequently, Respondent is subject to the $10,000 fine.

FINDINGS OF FACT

Having carefully considered all testimony and arguments presented at the hearing of this matter, and taking into account the credibility and accuracy of the evidence, I make the following Findings of Fact by a preponderance of the evidence:

1. On April 26, 1996, the Department's agent, Susan Tyndall, conducted an inspection of the Pelican Restaurant and Piano Bar (restaurant) located at 3795 E. North Street, Greenville, South Carolina. After completion of the inspection that day, the agent issued an administrative citation against Respondent for violating S.C. Code Ann. § 12-21-2720(C) (Supp. 1997) by failing to purchase licenses for four stations of a five-station Blackjack machine.
2. On the date of inspection, Respondent maintained at the restaurant a multi-player Blackjack machine, which is subject to licensure under section 12-21-2720(A)(3). The machine had five stations; however, only one of the stations was licensed.
3. At the time of the inspection, Respondent Stephen Lipscomb was the sole shareholder of American Amusement.
4. Respondent applied for a Class III license for the Blackjack machine in May of 1995. This license was displayed on one of the five stations of the Blackjack machine at the time of the inspection.
5. The Department seeks a $10,000 fine against Respondent.

CONCLUSIONS OF LAW AND ANALYSIS

1. Jurisdiction
2. Pursuant to S.C. Code Ann. § 12-4-30(D) (Supp. 1997) and S.C. Code Ann. § 1-23-320 (Supp. 1997), the Administrative Law Judge Division has jurisdiction to hear this matter.
3. Burden of Proof
4. In civil cases, generally, the burden of proof rests upon the party who asserts the affirmative of an issue. 2 Am. Jur. 2d Administrative Law § 360 (1994); Alex Sanders, et al., South Carolina Trial Handbook § 9:3 Party With Burden, Civil Cases (1994). The Department is the party asserting the affirmative in this case; therefore, the Department must prove by a preponderance of the evidence that Respondent violated § 12-21-2720(C). The preponderance of the evidence "is evidence which is of the greater weight or more convincing than the evidence which is offered in opposition to it . . . ." Black's Law Dictionary 1182 (6th ed. 1990). "The preponderance of the evidence means such evidence as, when considered and compared with that opposed to it, has more convincing force and produces in the mind the belief that what is sought to be proved is more likely true than not true." Sanders, supra, § 9:5 Quantum of Evidence in Civil Cases (1994), (citing Frazier v. Frazier, 228 S.C. 149, 89 S.E.2d 225 (1955)).
5. The weight and credibility assigned to evidence presented at the hearing of a matter is within the province of the trier of fact. See South Carolina Cable Television Ass'n v. Southern Bell Tel. and Tel. Co., 308 S.C. 216, 417 S.E.2d 586 (1992). Furthermore, a trial judge, who observes a witness, is in the better position to judge the witness's demeanor and veracity and evaluate his testimony. See McAlister v. Patterson, 278 S.C. 481, 299 S.E.2d 322 (1982); Peay v. Peay, 260 S.C. 108, 194 S.E.2d 392 (1973); Mann v. Walker, 285 S.C. 194, 328 S.E.2d 659 (Ct. App. 1985); Marshall v. Marshall, 282 S.C. 534, 320 S.E.2d 44 (Ct. App. 1984).
6. Analysis

S.C. Code Ann. § 12-21-2720(C) (Supp. 1997) provides:

The owner or operator of any coin-operated device which is exempt from section 16-19-60 and is subject to licensing under section 12-21-2720(A)(3) and which has multi-player stations, shall purchase a separate license for each such station and any multi-player station counts as a machine when determining the number of machines authorized for licensure under section 12-21-2804(A).

(Emphasis added).

At the time Respondent purchased his license in May of 1995, only one license was required for a multi-station Class III coin-operated machine. However, in an amendment which became effective July 1, 1995, the South Carolina General Assembly amended § 12-21-2720(C) to require a license for each station of a multi-player machine. Although Respondent contends that he relied on the license he procured in 1995 as adequate licensure for his multi-player Blackjack machine, the South Carolina Court of Appeals has held that such reliance is misplaced. In South Carolina Dep't of Revenue v. Rosemary Coin Machines, Inc., 331 S.C. 234, 500 S.E.2d 176 (Ct. App. 1998), the Court stated, "[a]s of the date it became effective, the amendment required that a multi-player machine must have licenses for each of its stations. The license purchased by Rosemary Coin prior to May 31, 1995 was still in effect on July 1, 1995, and acted to validly license one of the five stations on the [B]lackjack machine." Rosemary Coin, 331 S.C. at 245, 500 S.E.2d at 182.⁽¹⁾

Respondent asserts that he relied on the Administrative Law Judge's ruling in Rosemary Coin,⁽²⁾ and the circuit court's order in Andrews Amusement Co. v. South Carolina Dep't of Revenue and Taxation,⁽³⁾ finding that the amendment, effective July 1, 1995, did not apply to machines licensed prior to June 1, 1995. Respondent argues that he was not given fair warning of the requirement of amended section 12-21-2720(C) and its applicability to him, and therefore the imposition of any penalty for his failure to follow this statute would violate his due process rights.

Respondent's claim that he was not given fair warning of the requirements of § 12-21-2720(C) must fail for two reasons. First, Respondent was not a party in either the Rosemary Coin case or the Andrews Amusements case, and the lower tribunals' rulings on which he relied did not shield him from the Department's subsequent exercise of its police power against him. In a case to which an administrative agency is a party, a lower court's ruling on an issue does not prevent that agency from continuing to exercise its police powers over non-parties pending ultimate resolution of the issue by a court of last resort. See 21 C.J.S. Courts § 151 (1990) (decisions of a court of last resort are to be regarded as law and should be followed by lower courts, whatever the view of the latter may be as to their correctness).

Secondly, while it is arguable that amended section 12-21-2720(C) should not apply to machines licensed prior to June 1, 1995, the question of whether the plain language of the statute gave fair warning to machine owners and operators of the new licensing requirement, and its application to them, involves a separate framework of analysis. The right to due process of law requires only that a person have "'fair warning . . . in language that the common world will understand, of what the law intends to do if a certain line is passed.'" United States v. Lanier, 117 S.Ct. 1219 (1997) (citing McBoyle v. United States, 51 S.Ct. 340 (1931)). "[D]ue process bars courts from applying a novel construction of a criminal statute to conduct that neither the statute nor any prior judicial decision has fairly disclosed to be within its scope . . . ." ⁽⁴⁾ United States v. Lanier, 117 S.Ct. at 1225 (1997) (emphasis added). In each of these guises, the touchstone is whether the statute, either standing alone or as construed, made it reasonably clear at the relevant time that the defendant's conduct was [prohibited]." Id. (emphasis added).

I find that the plain language of amended section 12-21-2720(C), the law as it existed on the date of the violation, was reasonably clear and gave Respondent fair warning of the requirement the Department now seeks to enforce, that is, the purchase of four additional licenses for the five-station Blackjack machine in question.

Despite Respondent's argument to the contrary, I find that the Court of Appeals' opinion in Rosemary Coin neither expanded the scope of the plain language of the statute nor applied an unforeseeable construction to it, as the South Carolina Supreme Court did in Bouie v. City of Columbia.⁽⁵⁾ In Bouie, the United States Supreme Court held that the retroactive application of a judicial decision violates due process where the judicial construction of the statute in question is unexpected and indefensible by reference to the law which had been expressed prior to the conduct in issue; the question is whether a state court's construction is "so unforeseeable as to deprive the defendant of the fair warning to which the Constitution entitles him." Bouie, 84 S.Ct. at 1703. The Court found that the South Carolina Supreme Court's expanded interpretation of a criminal trespass statute violated the defendants' due process rights. The South Carolina Supreme Court had departed from not only the plain language of the statute in question, but also from ninety-five years of consistent case precedent construing the statute as it was plainly written. Bouie, 84 S.Ct. at 356-357 (1964). Notably, the United States Supreme Court found that the defendants in that case did not violate the statute as written.

Conversely, the Court of Appeals' opinion in Rosemary Coin is the first reported appellate opinion in the State to interpret the 1995 amendment to section 12-21-2720(C), a relatively new legislative enactment. The Court of Appeals interpreted this statute as it was plainly written. Moreover, in this case, Respondent violated section 12-21-2720(C) as it was plainly written.

Based on the foregoing, I find no merit to Respondent's argument that application of the Court of Appeals' construction of section 12-21-2720(C) to his conduct denies him due process of law.

1. Penalty

Respondent contends that if violations are found, fairness dictates a suspension of the fine under the facts of this case. South Carolina Code Ann. § 12-21-2738 (Supp. 1996) provides the penalty for failure to license a machine. It states, in pertinent part, "If the violation under this section relates to a machine licensed pursuant to Section 12-21-2720(A)(3), the applicable penalty amount is two thousand five hundred dollars, no part of which may be suspended."⁽⁶⁾ (Emphasis added).

Although the 1997 amendment to section 12-21-2738 deleted the words "no part of which may be suspended," this amendment was not effective until June 6, 1997. It is undisputed that the violation in this case took place prior to the effective date of the 1997 amendment. Therefore, the $2,500 penalty is mandatory in this case.

Based upon the foregoing Findings of Fact and Conclusions of Law, IT IS HEREBY ORDERED that pursuant to S.C. Code Ann. § 12-21-2738 (Supp. 1996), the Department shall impose a fine of $10,000 upon Respondent. The payment of such fine, however, shall be held in abeyance until the South Carolina Supreme Court disposes of the pending case, South Carolina Department of Revenue v. Rosemary Coin, Inc.

AND IT IS SO ORDERED.

______________________________

JOHN D. GEATHERS

Administrative Law Judge

November 6, 1998

Columbia, South Carolina

1. A petition for writ of certiorari to review the Court of Appeals' decision in Rosemary Coin is pending before the South Carolina Supreme Court.

2. Docket No. 95-ALJ-17-0498-CC. This ruling was issued by the Chief Administrative Law Judge, the Honorable Marvin F. Kittrell, in December, 1995 and was affirmed by the circuit court in May, 1997.

3. Docket No. 95-CP-40-3618, issued in January, 1996. This Order granted a temporary injunction. In that order, it is clear that the circuit court did not intend for its finding on the application of amended 12-21-2720(C) to have any binding effect:

This Court also examines the merits of ANDREWS' claim only to the extent necessary to determine whether ANDREWS has made a sufficient showing entitling it to a temporary injunction. It appears that ANDREWS['] argument that the Legislature did not intend to apply the July 1, 1995 amendments to Section 12-21-2720(C) retroactively to previously licensed machines is well founded.

(emphasis added).

4. While section 12-21-2720(C) is not a criminal statute, and it has been held that it is not a "penal" statute in the strictest sense of the word (Rosemary Coin, 500 S.E.2d at 182), this tribunal will assume for purposes of discussion that the fair warning requirement is equally applicable to § 12-21-2720(C).

5. 378 U.S. 347, 84 S.Ct. 1697, 12 L.Ed.2d 894 (1964).

6. Section 12-21-2738 was amended to delete the words "no part of which may be suspended" by Section 8A of Act 53 of 1997, effective June 6, 1997. "'[T]here is a presumption that statutory enactments are to be considered prospective rather than retroactive in their operation unless' the statutes are remedial or procedural in nature." Smith v. Eagle Construction Co., Inc., 282 S.C. 140, 143, 318 S.E.2d 8, 9 (1984) (citing Hercules, Inc. v. South Carolina Tax Comm'n, 274 S.C. 137, 143, 262 S.E.2d 45, 48 (1980). "'Statutes are remedial and [retroactive], in the absence of directions to the contrary, when they create new remedies for existing rights . . . enlarge the rights of persons under disability, and the like, unless [they] . . . violate some contractual obligation.'" Smith v. Eagle Construction Co., Inc., 282 S.C. 140, 143, 318 S.E.2d 8, 9 (1984) (quoting Byrd v. Johnson, 220 N.C. 184, 16 S.E.2d 843 (1941).

The amendment to section 12-21-2738 is not remedial (and thus not retroactive), and the date of Respondent's violation was April 26, 1996, prior to the effective date of the amendment. Thus, the amendment does not apply to Respondent's case.