SC Administrative Law Court Decisions

The South Carolina Department of Revenue (DOR) seeks fines of $10,000 and revocation of ten video poker licenses. Jimmy L. Martin, Sr. (Martin) as the owner of the ten machines and William Durham (Durham) as the location owner oppose DOR's position and assert the fines and revocations are not warranted. This disagreement places jurisdiction in the Administrative Law Judge Division (ALJD). S.C. Code Ann. §§ 12-60-1310, 12-60-1320, 1-23-600 (Supp. 2000). The hearing in this matter was held January 9, 2001 at the Edgar Brown Building, Columbia, South Carolina. Based upon the evidence and the argument presented by the parties, a fine of $5,000 is imposed and the revocation is proper.

1 Did Durham violate the single place or premises requirement of S.C. Code Ann. § 12-21-2804(A) (Rev. 2000) and 27 S.C. Code Ann. Regs. 117-190 (Supp. 2000) by failing to have at least one separate employee on the premises during business hours?

2. If a violation of the single place or premises requirement occurred, what monetary penalty is proper for Durham?

3. If a violation of the single place or premises requirement occurred, are all ten of Martin's licenses subject to revocation despite Martin's lack of intention or knowledge relative to the violation?

1. Positions of Parties

DOR asserts that Durham failed to have an employee on the premises of either game room, Kerry's 1 or Kerry's 2 while those game rooms were open. Martin and Durham disagree with DOR. They argue that Kerry 1 was open and had an employee covering that room. Further, they argue that Kerry 2 was closed and thus did not need an employee for that room.

2. Findings of Fact

Based on the preponderance of the evidence, the following findings of fact are entered:

A. Background Facts

Martin holds several licenses for Class III video game machines with ten of those licenses utilized at 3836 Augusta Road, Bath, South Carolina. The building at the Bath address contains a video game business in a structure housing two video game rooms. The game rooms have the following names and at the time of the inspection by SLED housed the following machines:

Kerry's 1 3150212, 3150213, 3150214, 3150215, 3150216

Kerry's 2 3150217, 3150218, 3150219, 3150220, 3150221

At approximately 11:30 a.m. on February 28, 2000, SLED conducted an inspection of the video game businesses at the Bath address. The inspection included walking into each area, listing the license numbers for machines located in the two game rooms, taking photographs of the location, and talking to an employee at the location.

As a result of the inspection, the SLED Agent issued a citation against Martin and Durham for violation of S.C. Code Ann. § 12-21-2804(A) (Rev. 2000) and 27 S.C. Code Ann. Regs. 117-190 (Supp. 2000) for operation of more than five machines in a single place or premises. Martin's licenses were revoked and a fine of $5,000 for each location (a total of $10,000) was issued against Durham as the owner of the location.

B. Disputed Facts

The first factual dispute is whether any room was closed.

As to Kerry's 2, Durham testified that Kerry's 2 would not be open unless his wife were present and that his wife was not present during the time of the SLED inspection. Indeed, no evidence shows Durham's wife present in either of the game rooms. Thus, Durham's testimony seeks to show Kerry's 2 was closed.

However, contrary to Durham's testimony, the SLED agent testified that Kerry's 2 was open. In fact, he took a photograph of the room during his inspection and the photo shows the door to the room was open. Most significantly, the photo shows a player playing one of the machines in Kerry's 2. To confirm the presence of a player in the room, the SLED agent talked to the player and recorded the player's name and recorded the license number of the machine being played, license number 3150220. That license number belongs to a machine that was in Kerry's 2.

Accordingly, I find Kerry's 2 was open for business. The door to the game room was open and a customer was playing a machine in the room.

Since Kerry's 2 was open for business, the next factual dispute is whether an employee was in that room. Here, the testimony is not in conflict.

Durham explained that he was the only employee in a game room and that he was in Kerry's 1, not Kerry's 2. The SLED Agent testified that the only person in Kerry's 2 was the player and that no employee came into the room during the inspection. Thus, I find no employee was in Kerry's 2 at the time of the SLED inspection.

The remaining factual dispute is whether an employee was on the premises of Kerry's 1 at the time of the inspection.

Initially, Durham was the employee for Kerry's 1. However, before the SLED agent entered the building, Durham began having an intestinal upset and left the game room to go to the bathroom. Before heading to the bathroom, Durham told the clerk at the counter near the front door of the building to cover Kerry's 1. The clerk stayed at the counter which was between 12 and 15 feet from the entrance to Kerry's 1.

When Durham left Kerry's 1, he relinquished his role as the employee covering Kerry's 1. Moreover, the clerk at the counter was left as the sole employee covering the two businesses of Kerry's 1 and Kerry's 2.

While Durham was still in the bathroom area, the SLED Agent entered the front doors of the building. He identified himself to the clerk at the counter and then began his inspection. He went first to Kerry's 2 and conducted his inspection. Upon finishing, he entered Kerry's 1.

The SLED agent entered Kerry's 1 through an open door. Inside Kerry's 1 he found five video poker machines, the machines were on, and no employee was within the four walls of the game room. During the agent's inspection of Kerry's 1, Durham returned to Kerry's 1 from the bathroom area.

At the conclusion of the inspection, the SLED agent issued a citation for failure to have an employee on the premises of either Kerry's 1 or Kerry's 2.

I find that two rooms were open and that no employee was within the physical four walls of either room. Rather, one employee was in the common area and one employee had left his duties as an employee and had gone to the bathroom.

3. Conclusions of Law

Based upon the above Findings of Fact, I conclude as a matter of law, the following:

A. Statutory and Regulatory Requirements for Single Place or Premises

For machines authorized under § 12-21-2720(A)(3), i.e. Class III machines, no person may maintain licenses or permits for more than five Class III machines at a single place or premises. S.C. Code Ann. § 12-21-2804 (Rev. 2000). The statute does not explain what constitutes a single place or premises. A definition is supplied, however, by Regulation 117-190.

Regulation 117-190 concentrates its analysis of a single place or premises by examining the physical characteristics of the structure enclosing the Class III machines and gives particular attention to exterior walls surrounding two or more video game areas. If at least two interior structures exist (i.e., each having a proper four wall configuration) and if Class III video games are located within each interior structure, then each interior structure is a video game area. Under such circumstances the inquiry becomes whether each video game area is a single place or premises allowing five machines within each area.

A decision on whether each video game area is a single place or premises is reached by a facts and circumstances methodology imposed by Regs. 117-190. Under the regulation, DOR "must review all the facts and circumstances to determine if each area in reality constitutes a single place or premise for video game machines." While a facts and circumstances review is normally very general, the regulation requires the existence of at least four facts. Indeed, a failure to meet any one of these criteria results in the video game area not being a separate place or premise. The four criteria are: (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?

B. Law Addressing Employee on the Premises

Here, DOR asserts that two game rooms at the Bath location had no separate employee on the premises as required by Regs. 117-190. If a location has only one employee to cover two businesses, a violation of S.C. Code Ann. § 12-21-2804(A) occurs. See South Carolina Department of Revenue v. Stardust Amusement Company, 341 S.C. 430, 534 S.E.2d 698, 700 (2000) ("The problem in McNickel's [331 S.C. 629, 503 S.E.2d 723 (1998)] was not that the employee was in the common area, but that there was only one employee and two businesses.").

In the instant case, Durham relinquished his position as the employee for Kerry's 1. In fact, in leaving to go to the bathroom, Durham specifically testified that he directed another individual, the employee at the counter at the front of the store, to become the employee covering Kerry's 1. Quite probably, given his intestinal upset, Durham believed he would not be back for some time and thus relinquished his position as the employee for Kerry's 1 and assigned Kerry's 1 to another employee. Having done so a single employee was left to cover two game rooms, Kerry's 1 and Kerry's 2. Accordingly, § 12-21-2804(A) was violated on February 28, 2000 at the video gaming businesses located at 3836 Augusta Road since more than five machines were at a single place or premises.

1. Positions of Parties

DOR asserts that a fine of $10,000 is due from Durham as the location owner. That amount is arrived at by DOR since DOR believes that two violations occurred and that a $5,000 fine is proper for each violation. Durham believes the penalty is too large.

2. Findings of Fact

Based on the preponderance of the evidence, the following findings of fact are entered:

The building occupied by Durham consists of a beauty shop, a convenience store and two game rooms. In each game room, five machines are situated giving a total of ten in use in the building. No other video poker machines are located in the building.

Durham's testimony confirms his use of a policy which allows one employee to cover more than one game room. Consistent with the stated policy, at the time of inspection on February 28, 2000, two game rooms had one employee for both rooms.

3. Conclusions of Law

Based upon the above Findings of Fact, I conclude as a matter of law, the following:

Clearly, a violation of section 12-21-2804(A) results in the imposition of a fine with the statutory maximum fine being $5,000. See S.C. Code Ann. § 12-21-2804(F) (Rev. 2000). Thus, to hold Durham to a $10,000 fine, DOR must establish that two violations occurred. Accordingly, the precise issue becomes deciding how many violations were committed by Durham and deciding what is the proper amount of the fine for each violation. Under the facts of this case, I find Durham committed one violation. Further, I find that Durham is liable for a fine of $5,000.

In determining how many violations were committed by Durham, it is necessary to determine exactly what act constitutes a violation. Deciding what act constitutes a violation requires following the intent of the statute under review.

When asked to interpret the meaning of a statute, the task is solely that of seeking to effectuate the legislature's intent. Laird v. Nationwide Ins. Co., 243 S.C. 388, 134 S.E.2d 206 (1964). In deciding legislative intent, the first and most basic inquiry is whether the language of the statute is plain and unambiguous and whether the statute conveys a clear and definite meaning. If the answer is yes, no occasion exists for employing rules of statutory interpretation, and the court has no right to look for or impose another meaning. Paschal v. State Election Comm'n, 317 S.C. 434, 454 S.E.2d 890 (1995). A court may not add words to a statute but can only apply the statutory language given by the General Assembly and must apply the terms of a clear and unambiguous statute according to their literal and ordinary meaning. Banks v. Columbia Ry., Gas & Electric Co., 113 S.C. 99, 101 S.E. 285 (1919); Glover v. Suitt Const. Co., 318 S.C. 465, 458 S.E.2d 535 (1995).

It is true that the courts will reject the ordinary meaning of the words used in a statute when to accept it would lead to a result so plainly absurd that it could not possibly have been intended by the Legislature or would defeat the plain legislative intention. Ray Bell Construction Company, Inc. v. School District of Greenville County, 331 S.C. 19, 501 S.E.2d 725 (1998). However, care must be taken not to rush to label a result "plainly absurd" when the application of the ordinary meaning of statutory language yields a result that is merely undesirable. A court should not rewrite statutes to provide a "better" result since such matters rest solely within the wisdom of the General Assembly. Creech v. South Carolina Pub. Serv. Auth., 200 S.C. 127, 20 S.E.2d 645 (1942).

This court has no legislative powers. In the interpretation of statutes our sole function is to determine and, within constitutional limits, give effect to the intention of the legislature. We must do this based upon the words of the statutes themselves. To do otherwise is to legislate, not interpret. The responsibility for the justice or wisdom of legislation rests exclusively with the legislature, whether or not we agree with the laws it enacts. Busby v. State Farm Mut. Auto. Ins. Co., 280 S.C. 330, 337, 312 S.E.2d 716, 720 (S.C. App. 1984).

A. Background Nature of the Violation

A violation occurs when a person "maintain[s] any licenses or permits for more than five [Class III] machines . . . at a single place or premises." To determine if a person has more than the authorized five machines, Regulation 117-190 explains what constitutes the requisite space identified as a single place or premises. In general, a single place or premises can be achieved in two configurations.

First, (omitting some requirements not pertinent to the issue at hand) a single place or premise is achieved by "a structure surrounded by exterior walls or firewalls consistent with the requirements of the applicable building code." Regs. 117-190. Such a structure is the common stand-alone building providing an entrance from the outside and providing an exit from the building to the outside. Such a structure may lawfully house five machines. The more difficult determination is the second permissible structure.

The second permissible structure that may be used to establish a single place or premises is that of "a structure surrounded by exterior walls [which] has two or more areas where video game machines are located." The "areas where video game machines are located" are interior configurations and those interior configurations are eligible for consideration as a "single place or premises" under two determinations. First, when considering the interior configuration, "each [must be] surrounded by exterior walls or firewalls." Second, before each interior configuration can become a single place or premises, DOR "must review all the facts and circumstances to determine if each area in reality constitutes a single place or premise for video game machines." That review may include many factors but must include at least the four factors of having a separate electric utility meter, having at least one separate employee on the premises during business hours, having a separate local business license where required, and having a separate state sales tax license.

B. Number of Violations

In the instant case, Durham sought to create two separate places or premises with each place or premises holding five Class III machines. However, a configuration is not a separate place or premises if the configuration does not have an employee on the premises. Regs. 117-190.

Here, neither of the two game rooms had an employee on the premises. Thus, the two configurations essentially became a single place or premises since the two game rooms were within "a structure surrounded by exterior walls or firewalls consistent with the requirements of the applicable building code."

Having identified the area that constituted a separate places or premises, the statute demands an inventory of the Class III machines occupying each space. Here, the inventory presents ten machines in the separate place or premises. Under the statute, a violation occurs when the number of machines on the space exceeds five. S.C. Code Ann. § 12-21-2804(A) (Supp. 1998). Since obviously ten exceeds five, a violation has been proven in the instant case. Moreover, and more to the point of this case, the excess over the limit of five produces only one violation. Such is true whether the limit is exceeded by one machine or ten or twenty-five or any other number.

The imposition of a single fine is consistent with the clear language of the statute and does not produce an absurd result so as to warrant disregarding that plain language. Had the General Assembly wanted multiple violations for each set of five excess machines, it could have easily created such a penalty. Rather, instead of multiple violations based on sets of five, the statute declares a single limit of five machines and explains that a penalty is imposed on the person that violates the five machine limit. Indeed, the General Assembly was aware that some violations would present facts requiring a greater penalty than other violations since § 12-21-2804(F) allows the imposition of a "fine of up to five thousand dollars" to account for violations deemed more significant than others.

In conclusion, in determining how many violations to cite under § 12-21- 2804(A), an important distinction exists between a failure to create separate places or premises and a failure to limit the number of machines at a proper place or premises to five. The former, in and of itself, establishes no violation of § 12-21-2804. The latter, however, violates § 12-21-2804 and gives rise to a penalty of up to $5,000. In other words, no penalty arises under § 12-21-2804(A) for attempting but failing to create a separate place or premises. Rather, § 12-21-2804(A) imposes a penalty only when the number of Class III machines on a properly constituted place or premises exceeds five. For example, an operator could place one Class III machine in each of five "interior" structures, fail to have an employee in any of the interior structures (thus, fail the separate place or premises requirement of Reg. 117- 190), and not violate § 12-21-2804(A), since the proper place or premises (the exterior walls comprising the structure that surrounds the interior configurations) is a valid single place or premises that does not exceed the five machines limit.

Based on the foregoing, Durham committed a single violation since more than five machines were in the single place or premises. Accordingly, the remaining issue is determining the amount of the fine to be imposed.

C. Amount of Fine

Where the General Assembly authorizes a range for an administratively imposed penalty, the administrative adjudicator sitting as the fact-finder may set the amount of the penalty after a hearing on the dispute. Walker v. South Carolina ABC Comm'n, 305 S.C. 209, 407 S.E.2d 633 (1991). When penalty disputes are part of the factual issues for decision, the fact-finder must receive evidence and make a determination on all such factual disputes arising from the contested case. S.C. Code Ann. §1-23-350 (Rev. 1986).

Here, the evidence establishes that Durham violated section 12-21-2804(A). While Durham may have violated the statute due to a failure to adequately staff game rooms when an employee needs a break, such a reason is not a sufficient basis to avoid a significant fine. Operators must provide adequate control over employee assignments at all times so as to ensure that all rooms have an employee present. Under such circumstances, the imposition of a $5,000 fine on Durham is proper.

1. Positions of Parties

Martin argues that as a machine owner, he knew nothing of the violations in this case since the location operator had responsibility for those areas. Thus, Martin argues he cannot have his licenses revoked. DOR argues that since a violation of S.C. Code Ann. § 12-21-2804 has been established, a revocation of all machines at the location is required. DOR asserts the violation is not dependent upon scienter and that a lack of knowledge by Martin is no defense.

2. Findings of Fact

Based on the preponderance of the evidence, the following findings of fact are entered:

A violation of the single place or premises requirement occurred at Durham's location on February 28, 2000. Of the ten machines found in violation, all are owned by Martin and all are housed in the game rooms owned by Durham. Martin has no management control of any employee working for Durham and Durham exercises day-to-day management control over employees at its two game rooms.

3. Conclusions of Law

Based upon the above Findings of Fact, I conclude as a matter of law, the following:

A. Statutory Requirements for Revocation

DOR "shall revoke the licenses of machines located in an establishment which fails to meet the requirements of this section." S.C. Code Ann. § 12-21-2804(A) (Rev. 2000). Here, the establishment does not meet the demands of the single place or premises requirement. Accordingly, the machine licenses located therein must be revoked.

B. Lack of Knowledge

Martin's lack of knowledge of the employee arrangements is not a basis for denying the revocation. The General Assembly did not impose a duty of finding the violator had any degree of intention such as "knowingly," "intentionally" or "willfully." Moreover, the General Assembly has demonstrated that when it wanted to impose scienter as a part of a violation it did so by specific language. See S.C. Code Ann. §12-21-2804(F) (upon a determination that a violation is wilful, criminal prosecution may be pursued). Since the statutory language does not impose knowledge as a requirement, none can be added.

Instead of an intention to violate the law, all the statute demands is proof that a license is being maintained for more than five machines at a single place or premises. Accordingly, the fact that Martin did not know the employee left his post for personal reasons does not halt the imposition of the revocation of all ten licenses. Thus, Martin's licenses for the Class III machines in the retail location known as Kerry's 1 and Kerry's 2 must be revoked. S.C. Code Ann. § 12-21-2804(A)(Rev. 2000).

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

William Durham shall pay to the South Carolina Department of Revenue a fine of $5,000 within fifteen days of the date of this order. Further, the ten licenses held by Jimmy L. Martin, Sr. for the ten machines identified in this order are revoked.

AND IT IS SO ORDERED.

____________________________

RAY N. STEVENS

Administrative Law Judge

Dated: February 12, 2001

Columbia, South Carolina