SC Administrative Law Court Decisions

This matter comes before me upon request for a Hearing by the Respondents after being cited for violating S.C. Code Ann. § 12-21-2804 (A)(Supp. 1996). The South Carolina Department of Revenue (Department) contends that the Respondents operated more than five video poker machines in a "single place or premise." A Hearing was held before the Administrative Law Judge Division on February 5, 1997.

I find the Respondents violated Section 12-21-2804.

Having observed the witnesses and exhibits presented at the hearing and closely passed upon their credibility, taking into consideration 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 given to the Petitioner and the Respondent.

2. The Department issued a violation report against J. L. Martin on September 12, 1995 charging the Respondent with having more than five machines in a "single place or premise." The Department offered no evidence as to whether each business had a separate electric meter, business license or a State sales tax license. Rather the sole issue for determination is whether the Respondent violated S.C. Code Regs. § 117-190 (Supp. 1996) by not having "at least one separate employee on the premises during business hours."

3. On September 12, 1995, Revenue Officer Tina Lee, conducted an investigation of the Bucket of Gold (Bucket) located on 103 North 12th Street in Columbia, South Carolina. Within the structure of the Bucket were six video game rooms operated as Pot O Gold; Lucky Charm; Four leaf Clover; Wishing Well; Rainbow Room; and Shamrock.

4. All of the rooms were open for business with the exception of the Rainbow Room. Each of the five open game rooms contained five video game machines. The twenty-five (25) Class III machines licences located in the above businesses were owned by Great Games, which is a business operated by J. L. Martin. The following video game machine licenses were located in the respective game rooms:

Pot O'Gold:

(27475-2)

46585

46542

46545

46537

46574

Lucky Charm:

(27474-3)

46473

46570

46538

46557

46567

Four Leaf Clover:

(27472-5)

46576

46510

46577

46531

46523

Wishing Well:

(27470-7)

46546

46568

46572

46563

46558

Shamrock:

(27473-4)

46525

46547

46527

46556

401765. The only two employees on the premises of the Bucket were Sue Newton and Paul Barick.

Ms. Newton and Mr. Barick were not on the premises of any of the above video game businesses but were, rather, located at the counter in the common area of the Bucket. See, Petitioner's Exhibit 3. Mr. Martin explained that if a customer came into the Bucket Ms. Newton or Mr. Barick would follow the customer to the open video game business they wished to patronize and stay upon the premises while the customer played the machines.

6. Mr. Martin contends that the Department's charge against him is improper because he never received a copy of Regulation 117-190 before the Department issued its violation report. Additionally, Mr. Martin contends he never received a written notice warning him of this potential violation. In light of Mr. Martin's knowledge and experience in the video poker industry I find his argument unconvincing.

7. Subsequent to the issuance of the above violation report, the Respondent's Class III machine permits expired and the location closed. Therefore, the only sanction appropriate in this case is a monetary fine. The Department seeks a Five Thousand ($5,000.00) fine.

8. I find that the Respondent violated S.C. Code Ann. § 12-21-2804 by having more than five machines in one location and impose a $4,000 fine.

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

1. The Administrative Law Judge Division has jurisdiction to hear this matter pursuant to S.C. Code Ann. § 12-4-30 (D) (Supp. 1996) and S.C. Code Ann. § 1-23-320 (Supp. 1996).

2. The Department contends that the Respondents violated S.C. Code Ann. § 12-21-2804(A)(Supp. 1996). That section provides:

After July 1, 1994, the commission [Department] may not issue nor authorize to be maintained any licenses or permits for more than five machines authorized under Section 12-21-2720(A)(3) at a single place or premises.

3. Machines licensed under Section 12-21-2720(A)(3) include video games with a 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. S.C. Code Ann. § 12-21-2804(A) (Supp.1996) states that the penalty for failing to comply with the maximum number of machines in a "single place or premise" is the revocation of the licenses of machines located in the establishment.

5. S.C. Code Ann. § 12-21-2804(F) (Supp. 1996) states that a person who violates Section 12-21-2804(A) may be fined up to five thousand dollars.

6. The Video Game Machines Act ("Act") does not define the term "single place or premise."

7. The Honorable G. Ross Anderson held that the term "single place or premise" is "sufficiently defined and susceptible of a common and ordinary meaning to provide a person of ordinary intelligence a reasonable notice of the prescribed conduct." Reyelt et al. v. South Carolina Tax Commission, CA No. 6: 93-1491-3 (D.S.C. July 5, 1994). On June 23, 1995, S.C. Code Regs. 117-190 (Supp. 1996) became effective. It provides as follows:

The Video Game Machines Act, found in Article 20, Chapter 21 of Title 12, limits the number of machines that may be located in a "single place" or "premises."

A single place or premises must be a fixed location. It does not include moving property such as a boat or a train, unless such property is permanently affixed to a specific location.

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 have at least one 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.

8. Regulation 117-190 requires that each business must have a separate employee on the premises while the business is open. The cardinal rule of statutory interpretation is to ascertain and effectuate the legislative intent wherever possible. Bankers Trust of South Carolina v. Bruce, 275 S.C. 35, 267 S.E.2d 424 (1980). "Full effect must be given to each section of a statute, giving words their plain meaning, and, in the absence of ambiguity, words must not be added or taken away." Hartford Accident and Indem. Co. v. Lindsay, 273 S.C. 79, 254 S.E.2d 301, 304 (S.C. 1979). Thus, the phrase "on the premise" presumptively must have meaning. In this case, the Respondent testified that the two employees at the location were not specifically assigned to any of the open businesses. The employees of a video poker business must be sufficiently connected to an open video game room as to indicate that each game room that is open for business has a specific employee assigned to work

solely in that room. I find that since the Respondent's video poker businesses did not have employees specifically assigned to each game room, the above five game rooms were not single places or premises.

9. It is a generally recognized principle of administrative law that the fact finder has the authority to impose an administrative penalty after the parties have had an opportunity to have a hearing and be heard on the issues. See Ohio Real Estate Comm'n v. Aqua Sun Investments, 655 N.E. 2d 266 (Ohio 1995); Shadow Lake of Noel, Inc. v. Supervisor of Liquor Control, 893 S.W. 2d 835 (Mo. App. S.D. 1995); Matter of Henry Youth Hockey Ass'n, 511 N.W. 2d 452 (Minn. App. 1994); Vermont Agency of Natural Resources v. Duranleau, 617 A.2d 143 (Vt. 1992); City of Louisville v. Milligan, 798 S.W. 2d 454 (Ky. 1990); Com., Dept. of Transp. v. Slipp, 550 A.2d 838 (Pa. 1988); Dept. of Transp. v. Miller, 528 A.2d 1030 (Pa. 1987); State Police v. Cantina Gloria's, 639 A. 2d 14 (Pa. 1994).

Prior to governmental restructuring, a commission, sitting in its adjudicatory capacity imposed penalties for violations of statutory provisions administered by the Commission's subordinate agency. In its capacity as the fact-finder, the Tax Commission would conduct an adjudicatory hearing in all contested cases arising under Title 12 of the South Carolina Code, and would render an order containing findings of fact and conclusions of law. As the fact-finder, it was the commission'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). With the advent of restructuring and the abolition of the Tax Commission, however, the Administrative Law Judge Division was given the authority to hear "all contested cases, as defined by Section 1-23-310 and as previously considered by the three [Tax] commissioners. . . ." S.C. Code Ann. §12-4-30(D) (Supp. 1996). The Administrative Law Judge, as the current fact-finder, must also impose a penalty based on the facts presented at the contested case hearing. Parties are entitled to present evidence on all issues arising out of the contested agency action and the tribunal responsible for conducting the contested case proceedings has the authority to decide the issues based on the facts presented, and make the final decisions on all the issues, including the appropriate penalty.

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

ORDERED that a fine of $4,000 is imposed upon the Respondent J. L. Martin, Jr.

Columbia, South Carolina

May 23, 1997