SC Administrative Law Court Decisions

This matter is before this tribunal for a contested case hearing pursuant to S.C. Code Ann. §§ 1-23-310 et seq. (Supp. 1996) and S.C. Code Ann. § 12-4-30(D) (Supp. 1996) on alleged administrative violations. The South Carolina Department of Revenue ("Department") alleges that on June 13, 1996, Respondents violated S.C. Code Ann. § 12-21-2804(A) by applying for, receiving, maintaining, or permitting to be used permits for the operation of more than five machines authorized under S.C. Code Ann. § 12-21-2720(A)(3) (Supp. 1996) at a single place or premises. Specifically, the Department alleges a violation of the "one separate employee" requirement of 27 S.C. Code Ann. Regs. 117-190 (Supp. 1996).

For alleged violations of S.C. Code Ann. § 12-21-2804(A) (Supp. 1996), the Department seeks a $5,000 fine against each Respondent, revocation of thirty (30) Class III video game machine licenses located at Treasure Land Video on June 13, 1996, and preclusion of the use of any Class III video game machine licenses at these businesses.

The hearing of this matter was held on September 23, 1997. The issues before this tribunal are (1) whether Respondents violated S.C. Code Ann. § 12-21-2804(A) and 27 S.C. Code Ann. Regs. 117-190 (Supp. 1996) 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 Edwin Alewine and Tina Alewine violated S.C. Code Ann. § 12-21-2804(A) and 27 S.C. Code Ann. Regs. 117-190 (Supp. 1996) by utilizing video game machine licenses in contravention of these laws. Consequently, the licenses shall be revoked. No video game machine licenses shall be utilized in Treasure Land Video for a period of six months from the date of revocation of the licenses. Further, the Department shall impose a fine of $5,000 each against Respondents Edwin Alewine and Tina Alewine.

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 June 13, 1996, the Department's agents W.E. Riley and D.F. Frick conducted an inspection of the video gaming businesses located at 2110 Main Street, Columbia, South Carolina. After completion of the inspection on that day, the agents issued Respondents an administrative citation for a violation of the "single place or premises" requirement of S.C. Code Ann. § 12-21-2804(A) and 27 S.C. Code Ann. Regs. 117-190 (Supp. 1996).

2. At the time of the inspection, the facts relating to the "single place or premises" requirement of the S.C. Code Ann. § 12-21-2904(A) and 27 S.C. Regs 117-190 (Supp. 1996) were as follows:

a. Treasure Land Video was a mall-type structure consisting of six separate rooms containing video gaming machines.

b. There was a main entrance into the structure that opened into a common area.

c. There was one payout counter located in the common area.

d. All of the businesses were open and contained operational Class III video game machines which were available for play. In fact, three of the rooms had patrons playing the machines.

e. There were no employees present in any of the rooms as designated in Petitioner's Exhibit # 3. Two employees were, however, situated in the common area at the payout counter. Edwin Alewine and Tina Alewine were in the office.

f. Each of the video gaming businesses had separate sales tax licenses. See Petitioner's Exhibit # 2.

3. On June 13, 1996, the following Class III licenses were affixed to the machines in the rooms as designated on Petitioner's Exhibit #s 2 and 3 and held by the corresponding licensee:

4. Edwin Alewine holds the retail licenses for the businesses referenced above.

5. No sufficient evidence was proffered by the Department to establish that Respondent Great Games, Inc. managed or operated the video game businesses located at Treasure Land Video. Further, insufficient evidence was presented to establish that Great Games, Inc. applied for, received, maintained, or permitted to be used Class III video game machine licenses in contravention of § 12-21-2804(A).

6. The Department seeks a $5,000 fine against each Respondent, revocation of thirty (30) Class III video game machine licenses located at Treasure Land Video on June 13, 1996, and preclusion of the use of any Class III video game machine licenses at this location for a period of six months from the date of revocation.

CONCLUSIONS OF LAW AND ANALYSIS

A. Jurisdiction

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

B. Burden of Proof

2. In civil cases, generally, the burden of proof rests upon the party who asserts the affirmative of an issue. 29 Am. Jur 2d Evidence § 127 (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 Respondents failed to have a separate employee in each of their respective businesses in violation of S.C. Code Ann. § 12-21-2804(A) (Supp. 1996) and 27 S.C. Code Ann. Regs. 117-190 (Supp. 1996). 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)).

C. Single Place or Premises Violation

3. Respondents Great Games, Inc., Edwin Alewine, and Tina Alewine are the licensees of the Class III video game machines licensed under S.C. Code Ann. § 12-21-2720(A)(3) (Supp. 1996), which are the subject of this case. Both Respondents Tina Alewine and Edwin Alewine were present at the location at the time of inspection.

4. Respondent Edwin Alewine is the operator of the Class III video game machines located in Treasure Land Video, which are the subject of this case.

5. 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 codified at S.C. Code Ann. §§ 12-21-2770, et seq. (Supp. 1996). 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 Reyelt v. South Carolina Tax Comm'n, Nos. 6:93-1491-3 and 6:93-1493-3 (D.S.C. Nov. 15, 1993); See also Op. Att'y. Gen 94-21 at 51 (1994).

6. Petitioner alleges that on June 13, 1996, Respondents violated S.C. Code Ann. § 12-21-2804(A) and 27 S.C. Code Ann. Regs. 117-190 (Supp. 1996) by applying for, receiving, maintaining, or permitting to be used permits for the operation of more than five machines authorized under S.C. Code Ann. § 12-21-2720(A)(3) (Supp. 1996) 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).

7. 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 Young v. South Carolina Dep't of Highways and Pub. Trans., 287 S.C. 108, 336 S.E.2d 879 (1985); Faile v. South Carolina Employment Sec. Comm'n, 267 S.C. 536, 230 S.E.2d 219 (1976). Specifically, Regulation 117-190 was promulgated to clarify the meaning of the phrase "single place or premises" as set forth in § 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.

27 S.C. Code Ann. Regs. 117-190 (Supp. 1996) (emphasis added).

8. The first issue before this tribunal is whether any person applied for, received, maintained, or permitted to be used permits for the operation of more than five machines authorized under S.C. Code Ann. § 12-21-2720(A)(3) (Supp. 1996) at a single place or premises, in violation of S.C. Code Ann. § 12-21-2804(A) and 27 S.C. Code Ann. Regs. 117-190 (Supp. 1996).

9. 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 Assocs., 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. South Carolina Pub. Serv. Auth., 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. Home Health Serv., Inc. v. South Carolina Tax Comm'n, 312 S.C. 324, 440 S.E.2d 375 (1994); Bryant v. City of Charleston, 295 S.C. 408, 368 S.E.2d 899 (1988). 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 & 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).

It should be emphasized that S.C. Code Ann. § 12-21-2804(A) (Supp. 1996) clearly precludes any person, not just the licensees, from applying for, receiving, maintaining, or permitting to be used permits for the operation of more than five Class III video game machines in a single place or premises. The term person is not defined in the Act, but its common and ordinary meaning clearly encompasses an individual or a business entity as well as a licensee or machine owner. See Black's Law Dictionary 1142 (6th ed. 1995). Further, § 12-21-2804(A) mandates that the Department revoke the licenses of the machines located in an establishment which fails to meet the requirements of this section. Hence, § 12-21-2804(A) (Supp. 1996) mandates revocation of the licenses so used, even if the licensee was not directly involved in applying for, receiving, maintaining, or permitting its licenses to be used in contravention of the statute. Such an interpretation is consistent with the plain language of the statute.

10. The facts of this case clearly indicate that there were at least thirty operational Class III video game machines located in the various rooms of Treasure Land Video. Each room contained five operational licensed Class III video game machines. The evidence further indicates that all rooms were open for business at the time of inspection. However, no employees were situated in any of these rooms during the inspection.

11. There is sufficient evidence to establish that Edwin Alewine and Tina Alewine clearly permitted licenses to be used in contravention of the statute, S.C. Code Ann. § 12-21-2804(A), which prohibits the operation of more than five Class III video game machines within a single place or premises. However, the Department did not present sufficient evidence to establish that Respondent Great Games, Inc. applied for, received, maintained, or permitted to be used permits for the operation of more than five machines authorized under S.C. Code Ann. § 12-21-2720(A)(3) (Supp. 1996) at a single place or premises, in violation of S.C. Code Ann. § 12-21-2804(A) and 27 S.C. Code Ann. Regs. 117-190 (Supp. 1996).

Under § 12-21-2804(A), a license on a video game machine must be revoked by virtue of its misuse under the Act, regardless if the actual violator is the licensee, machine owner, or lessee. However, a monetary fine under § 12-21-2804(F) may only be imposed on the actual person directly involved in the violation of § 12-21-2804(A). When applying for a license, a licensee violates the statute if he applies for a license to be used in the operation of more than five machines at a single place or premises to violate the statute. The statute does not state, as the Department would like this tribunal to construe it, that a person who applies for a license which is subsequently used for the operation of more than five machines at a single place or premises is in violation of the statute. In the instant case, even if Respondents Edwin Alewine and Tina Alewine, did not violate the statute when they applied for licenses, they unequivocally violated it in the day to day operation and maintenance of the businesses. The Department has not established, however, that Respondent Great Games violated the statute when applying for licenses or was involved in the operation and maintenance of the businesses.

12. 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 § 12-21-2804(A).⁽¹⁾

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 § 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 South Carolina Dep't of Revenue and Taxation v. 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. South Carolina 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).

13. 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 their testimony. See 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); 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).

14. Respondents Edwin Alewine and Tina Alewine have failed to meet the "one separate employee" requirement set forth in Regulation 117-190 with regard to the rooms in Treasure Land Video. Failing to satisfy one requirement is a sufficient ground constituting a violation of the single place or premises requirements of S.C. Code Ann. § 12-21-2804(A) (Supp. 1996). Therefore, I conclude that the businesses at Treasure Land Video, 2110 Main Street, Columbia South Carolina, were operated in violation of S.C. Code Ann. § 12-21-2804(A). Consequently, all thirty (30) of the Class III video game machine licenses at Treasure Land Video are subject to revocation.

D. Penalty

15. S.C. Code Ann. § 12-21-2804(A) (Supp. 1996) 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.

16. S.C. Code Ann. § 12-21-2804(A) (Supp. 1996) provides that the penalty for exceeding the maximum number of video game machines permitted in a single place or premises requires the revocation of the licenses of machines located in the establishment.

17. S.C. Code Ann. § 12-21-2804(A) (Supp. 1996) 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 meaning of this language is to preclude an establishment which has had a license revoked from utilizing new licenses for a six month period. Hence, as all of the current licenses have been revoked and no new licenses may be utilized at this location, this location must cease operations for six months. 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. South Carolina 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).

18. S.C. Code Ann. § 12-21-2804(F) (Supp. 1996) provides that a person who violates S.C. Code Ann. § 12-21-2804(A) is subject to a fine of up to $5,000. The Department seeks a $5,000 fine against Great Games, Inc., the licensee of some of the machines in question. However, the Department has not established that Great Games, Inc. applied for, received, maintained, or permitted to be used permits for the operation of more than five machines authorized under S.C. Code Ann. § 12-21-2720(A)(3) (Supp. 1996) at a single place or premises. See Stacks v. South Carolina Dep't of Revenue and Taxation, 95-CP-40-0239 at 8-9 (C.P. Richland County April 20, 1995).

Under § 12-21-2804(A), a license on a video game machine must be revoked by virtue of its misuse under the Act, regardless if the violator is the licensee, machine owner, or lessee. However, a monetary fine under § 12-21-2804(F) may only be imposed on the person directly involved in the violation of § 12-21-2804(A). In this case, the Department only presented sufficient evidence to establish that Respondents Edwin Alewine and Tina Alewine were directly involved in violating the Act. The Department did not present sufficient evidence to warrant the imposition of a fine against Respondent Great Games, Inc., pursuant to S.C. Code Ann. § 12-21-2804(F) (Supp. 1996).

Based upon the foregoing Findings of Fact and Conclusions of Law, IT IS HEREBY ORDERED that, as mandated by S.C. Code Ann. § 12-21-2804(A) (Supp. 1996), the Department shall revoke the thirty (30) video game machine licenses referenced herein, located at Treasure Land Video, 2110 Main Street, Columbia, South Carolina.

IT IS FURTHER ORDERED that no video game machine licenses shall be utilized in any of the rooms at Treasure Land Video for a period of six months from the date of revocation of the licenses.

IT IS FURTHER ORDERED that the Department shall impose a fine of $5,000 each against Respondents Edwin Alewine and Tina Alewine.

IT IS FURTHER ORDERED that the imposition of a $5,000 fine against Great Games, Inc. must fail.

IT IS FURTHER NOTED that 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

November 19, 1997

Columbia, South Carolina

1. Regulation 117-190 has been held to be "valid and enforceable and a valid exercise of the power of the . . . Department." McNickel's, Inc. v. South Carolina Dep't of Revenue, 96-CP-07-1072 (C.P. Beaufort County June 6, 1997); See also AAA Entertainment Corp. v. South Carolina Dep't of Revenue, 96-CP-07-1595 (C.P. Beaufort County June 6, 1997); Scurry v. South Carolina Dep't of Revenue, 97-CP-07-0408 (C.P. Beaufort County June 6, 1997). The one separate employee requirement of Regulation 117-190 was specifically considered in each of these decisions and held to be a valid exercise of legislative authority. Id.