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SC Administrative Law Court Decisions

SCDOR vs. M. L. Harley d/b/a Broadway Restaurant and Lounge and Collins Holding Corporation

South Carolina Department of Revenue

South Carolina Department of Revenue

M. L. Harley d/b/a Broadway Restaurant and Lounge and Collins Holding Corporation

Michael K. Kendree, Esquire, for Petitioner

Timothy C. Youmans, Esquire, for Respondent




This matter comes before the Administrative Law Judge Division (Division) for a contested case hearing pursuant to S.C. Code Ann. § 1-23-600 (Supp. 1999). Respondent Collins Holding Corporation (Collins) challenges the issuance of the South Carolina Department of Revenue's (Department) Final Determination dated January 19, 2000. (1) The Department seeks revocation of Type III coin-operated device licenses #3153871 and #3153872 held by Collins. The revocation is pursuant to a payout allegedly made to an underage cooperating individual under the age of twenty-one (21), in violation of S.C. Code Ann. §12-21-2804(C) (Supp. 1999). A hearing on this matter was held before me on April 11, 2000 at the offices of the Division in Columbia, South Carolina.


Having observed the witnesses and exhibits presented at the hearing and closely passed upon their credibility, considering the burden of persuasion by the parties, I make the following Findings of Fact by a preponderance of evidence:

1. Notice of the time, date, place and subject matter of the hearing was timely given to the Petitioner and Respondents.

2. At the time the citation was issued, Respondent Collins held South Carolina Class III Coin Operated Device (COD) licenses #3153871 and #315872. Those licenses were attached to video poker machines owned by Respondent Collins and being operated at Broadway Restaurant and Lounge (Broadway Restaurant). In accordance with the South Carolina Supreme Court's decision in the case of Joytime Distributors and Amusement Co., Inc. vs. The State of South Carolina, 338 S.C. 634, 528 S.E.2d 647 (1999), the two (2) Class III licenses are no longer active as a result of the ban on the operation of Class III coin-operated devices. Therefore, the Department has withheld the value of these two Class III COD licenses from the license refunds issued to Respondent Collins, pending the outcome of this proceeding.

3. On November 16, 1999, Ms. Brady, an underage cooperating individual (UCI) working on the behalf of the South Carolina Law Enforcement Division (SLED), played a video poker machine located in the Broadway Restaurant. Afterwards, an employee of the Broadway Restaurant accepted and cashed a video poker payout ticket from Ms. Brady, a person under twenty-one (21) years of age. Respondent Broadway has since gone out of business and is not contesting this citation.

4. No employee of Respondent Collins was located on the premises of Broadway Restaurant and Collins did not maintain or operate the premises on which the payout occurred.


Prior to the hearing in this matter, counsel for both parties submitted the following stipulations of fact:

1. The Broadway Restaurant is located at 5020 Rivers Avenue, North Charleston, South Carolina.

2. Respondent Collins owns the Type III coin-operated devices in issue in the above-captioned case with Type III coin-operated device licenses #3153871 (exp. 2001) and #3153872 (exp. 2001).

3. On November 16, 1999, the Type III CODs in issue in the above-captioned case with Type III COD licenses #315871 and #315872 were in use in the Broadway Restaurant.

4. The person cited with making the payment to the UCI was not an employee of Respondent Collins.

5. After the UCI exited the Lounge, SLED Agent John Andrew Ramey, III entered the Lounge with members of the North Charleston Police Department and issued a Preliminary Findings Report for violation of S.C. Code Ann. §12-21-2804(C) (1999).

6. The payout ticket in issue was retained as evidence by law enforcement.

7. An Agency Initial Citation was issued to Respondent Collins and Respondent M. L. Harley d/b/a Broadway Restaurant and Lounge on December 15, 1999.

8. Respondent M. L. Harley d/b/a Broadway Restaurant and Lounge voluntarily surrendered Retail Sales License #010-60683-7 and Video Games Licensed Establishment License #85505552-8.

9. Respondent Collins was not involved in any form or fashion with any payment to the UCI in this matter other than owning the Class III licenses located at the Broadway Restaurant.

10. The payment made to the UCI from the Respondent Collins' video poker machine(s) was made by an agent and/or employee of the Broadway Restaurant.

11. Employees of Broadway Restaurant do not generally act as agents of Collins Holding Corporation.


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

1. The Administrative Law Judge Division has jurisdiction to hear this matter pursuant to S.C. Code Ann. §§12-4-30(D) and 1-23-320 (1999).

2. The Department contends that Respondent Collins violated S.C. Code Ann. §12-21-2804(C) (1999) which provides:

No person under twenty-one years of age may receive a payout as a result of the operation of the machines licensed under Section 12-21-2720 (A)(3).

3. "The principle is well established that penal statutes are strictly construed, and one who seeks to recover a penalty for failure on the part of the defendant to discharge some duty imposed by law, must bring his case clearly within the language and meaning of the statute awarding the penalty." State ex rel. Moody vs. Stem et al., 50 S.E.2d 175 (1948) (citing State vs. Lewis, 141 S.C. 207, 139 S.E. 386 (1927)). Therefore, it is clear that the provisions of the Video Game Machines Act must be strictly construed against the Department and in favor of Respondent Collins.

4. Here, the Respondent violated S.C. Code Ann. §12-21-2804(C) (1999). However, S.C. Code Ann. §12-21-2804(F) provides that:

A person violating subsections (A), (B), (D), or (E) of this section is subject to a fine of up to five thousand dollars to be imposed by the department. . . . The department shall revoke the licenses of any person issued pursuant to the provisions of Article 19 of this chapter for a violation of subsection (C) of this section. Revocation is pursuant to the procedures set forth in Section 12-54-90.

S.C. Code Ann. § 12-54-90(A) (Supp. 1999) sets forth that "[w]hen a person fails, neglects, violates, or refuses to comply with a provision of law or regulation administered by the department, the department, in its discretion, may revoke one or more licenses held by the taxpayer within ten days of notification in writing of the taxpayer's failure to comply." Although the Video Game Machines Act found under Article 20 of Title 12 does not define the term "person," I find the definition of "person" in Article 17 of Title 12 of the S.C. Code to be persuasive. That definition sets forth: "[t]he word person means individual, partnership, corporation, association, or organization of any kind whatsoever." S.C. Code Ann. § 12-21-2410(3) (Supp. 1999). (2) Respondent Collins is therefore a person within the meaning of Section §12-21-2804(F). However, the evidence did not establish that Collins did not comply with Section 12-21-2804(C).

The Department did not provide any evidence that Respondent Collins knew or should have known of the cash payouts involved in this matter or of any other improper cash payouts.

To the contrary, the parties stipulated that the UCI was not an employee of Respondent Collins

and that Collins was not involved in any form or fashion with any payment to the under-aged UCI. Our Supreme Court recently addressed the issue of third party liability relating to a "single place or premises" violation of S.C. Code Ann. §12-21-2804(A) in South Carolina Department of Revenue vs. Collins Entertainment Corp., 340 S.C. 77, 530 S.E. 2d 635 (2000). In Collins, the Department charged the licensee with "operating in violation of the 'one employee/one location' rule" of 27 S.C.Code Ann. Regs. 117-190. The Court upheld the Administrative Law Judge's determination that S.C. Code Ann. § 12-21-2804(A) means that "the 'maintain' and 'permit to be used' provisions of § 12-21-2804(A) . . . apply to the use of the licensed machines after the licensee had 'applied for [and] received' the licenses." Collins at 636. The Court further found that "where the violation occurred in the use of the machines and not their licensure, only the persons(s) directly involved in the business operation is subject to a fine." Id.

Here, the penalty provision of Section 12-21-2804(F) (Supp. 1999) that was applicable to the violation in Collins is the same provision that is applicable to the violation in this case. Therefore, since "the Department did not prove the Respondent violated the statute at the time of the licensure, nor that it was directly involved in the maintenance or operation of the business where the violations occurred, . . . [t]he Department . . . failed to establish that Respondent applied for, received, maintained or permitted to be used permits in violation of the one employee/one premise rule." Collins at 636. Had the General Assembly intended the penalties associated with such a violation to extend to third parties or to machine licenses, it would have provided so in the language of the statute. "Where a statute is clear and unambiguous, the terms of the statute must be given their literal meaning." Duke Power Co. v. South Carolina Tax Commission, 292 S.C. 64, 354 S.E.2d 902 (1987).


Based upon the above Findings of Fact and Conclusions of Law it is hereby:

ORDERED that the citation issued against Respondent Collins is dismissed.



Ralph K. Anderson, III

Administrative Law Judge

October 23, 2000

Columbia, South Carolina

1. In this matter, Collins Holding Corporation is challenging its accountability for the actions of employees of M.L. Harley, d/b/a Broadway Restaurant and Lounge. M.L. Harley, d/b/a Broadway Restaurant and Lounge, voluntarily surrendered its retail sales license and video games establishment license to the Department. Therefore, Collins is the only Respondent in this Order.

2. Also, Black's Law Dictionary defines "person" as, "[i]n general usage, a human being (i.e., natural person), though by statute term may include labor organizations, partnerships, associations, corporations, legal representatives, trustees, trustees in bankruptcy, or receivers." Black's at 1142 (6th ed. 1990).

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