South Carolina              
Administrative Law Court
Edgar A. Brown building 1205 Pendleton St., Suite 224 Columbia, SC 29201 Voice: (803) 734-0550

SC Administrative Law Court Decisions

CAPTION:
SCDOR vs. William Scurry, d/b/a Flamingo II, et al

AGENCY:
South Carolina Department of Revenue

PARTIES:
Petitioners:
South Carolina Department of Revenue

Respondents:
William Scurry, d/b/a Flamingo II, d/b/a Flamingo III, d/b/a Flamingo IV
 
DOCKET NUMBER:
96-ALJ-17-0543-CC

APPEARANCES:
Carol I. McMahan
Attorney for Petitioner

H. Fred Kuhn, Jr.
Attorney for Respondent
 

ORDERS:

ORDER AND DECISION

This matter comes before me for a contested case hearing pursuant to S.C. Code Ann. §§ 1-23-310, et seq. (Supp. 1995) and S.C. Code Ann. § 12-4-30(D) (Supp. 1995) on alleged administrative violations. The South Carolina Department of Revenue ("Department") alleges that on June 13, 1996, respondent William Scurry, d/b/a Flamingo II, III, and IV, violated S.C. Code Ann. § 12-21-2804(A) by maintaining more than five (5) Class III video game machines at a single place or premises. Specifically, the Department alleges violations of the "one separate employee" and "separate electric utility meter" requirements of 27 S.C. Code Ann. Regs. 117 § 190 (Supp. 1995). The Department also alleges that respondent violated S.C. Code Ann. § 12-21-2748 (Supp. 1995) by failing to affix owner/operator identification to a machine located in Flamingo II.

Initially, the Department sought a $2,500 fine against Hindman Music Company and a $5,000 fine against J.V. Amusements for failure to affix owner/operator identification to their three machines which were allegedly located in Flamingo II. However, prior to the hearing of this matter, upon motion of the Department, respondent Hindman Music Company was dropped as a party in this case. After notice to all parties, a hearing was held at the Administrative Law Judge Division in Columbia, South Carolina. At the hearing of this matter, the Department also voluntarily dropped J.V. Amusements as a party in this case. As a result, the only remaining respondent is William Scurry, d/b/a Flamingo II, III, and IV.

The Department seeks a $5,000 fine for the alleged violations of S.C. Code Ann. § 12-21-2804(A) (Supp. 1995), a $2,500 fine for the alleged violation of S.C. Code Ann. § 12-21-2748, revocation of nine video game machine licenses located at 1468 Edgefield Highway, North Augusta, South Carolina on June 13, 1996, and preclusion of the issuance of video game machine licenses at the location for six months from the date of license revocation.

The issues before this tribunal are (1) whether respondent violated S.C. Code Ann. § 12-21-2804(A) (Supp. 1995) and S.C. Code Regs. 117 § 190; (2) whether respondent violated S.C. Code Ann. § 12-21-2748 (Supp. 1995); and, (3) 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 respondent violated S.C. Code Ann. § 12-21-2804(A), S.C. Code Regs. 117 § 190, and S.C. Code Ann. § 12-21-2748 (Supp. 1995). Furthermore, the penalties imposed by the Department are sustained.

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 following Class III video game machine businesses were owned and operated by William Scurry and James Poor at 1468 Edgefield Highway, North Augusta, South Carolina: Flamingo II, Flamingo III, and Flamingo IV.

2. Department agents conducted an inspection of the video gaming businesses located at 1468 Edgefield Highway, North Augusta, South Carolina, on June 13, 1996. The structure in which Flamingo II, III, and IV were operated was a mall-type property. There was a main entrance into the structure which opened into a lobby/common area. The three business entities were located in three separate rooms which opened into the common area. Flamingo II contained four Class III video game machines; Flamingo III contained five Class III video game machines, Flamingo IV contained a five station multi-player Class III video game machine, but only three stations were operational. Additionally, there were three video game machines located in the common area. There were also separate rooms designated for restrooms and storage.

3. On June 13, 1996, the facts relating to the "single place or premises" requirement of S.C. Code Ann. § 12-21-2804(A) (Supp. 1995) and S.C. Code Regs. 117 § 190 were as follows:

a. Each of the three video game rooms contained licensed Class III video game machines.

b. Each of the three game rooms were surrounded by exterior walls or fire walls without doors or openings leading directly to another area where video game machines were located.

c. Each of the three video game rooms had separate electric meters, however, the meters were not operational at the time of inspection. The dials on the meters read "00000" and the wheels were not turning.

d. Each of the three video game rooms/entities had separate sales tax licenses.

e. Each entity was open for business. The outside doors of the mall-type structure were unlocked; the lights were on in the common area; doors to each entity containing Class III video game machines were open; and, the lights were on inside each of these rooms. The video game machines in the three businesses were turned on and available for play.

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

g. Each business entity failed to have a separate employee on the premises. At the time of inspection, there was one employee on the premises who was located near the office in the common area. There were no employees located in any of the entities containing video game machines.

h. There was a customer present in Flamingo III, one of the rooms containing video game machines.

4. On June 13, 1996, the following Class III video game machine licenses were affixed to machines in the respective businesses and held by the corresponding licensees:

Business Entity License Number Licensee

Flamingo II 033155 J.V. Amusements

" " 033153 J.V. Amusements

" " 025375 William Scurry

*** (another machine was located on the premises, but the Department's

agent mistakenly transposed the license number)

Flamingo III 025369 William Scurry

" " 025374 William Scurry

" " 025370 William Scurry

" " 025368 William Scurry

" " 025367 William Scurry

Flamingo IV 025377 William Scurry

" " 025376 William Scurry

" " 025373 William Scurry

5. There was no owner/operator identification displayed on the four machines located in Flamingo II. The licensee of one of the machines was believed by the Department to be Hindman Music Company. Prior to the hearing of this matter, Hindman Music Company submitted an affidavit concerning license # 033176, showing that this particular license was actually affixed to a video game machine located at the Grapevine Restaurant when the alleged violation occurred on June 13, 1996. As a result, the Department moved this tribunal to drop Hindman Music Company as a party from this case. The Department's motion was granted on January 17, 1997. J.V. Amusements was the licensee of two of the machines. At the hearing of this matter, the Department voluntarily dropped J.V. Amusements as a party to this case. William Scurry was the licensee of the machine displaying license # 025375, which was located in Flamingo II on the date of inspection.

6. The machines located in Flamingo III and Flamingo IV displayed owner/operator identification. Hilton Head Amusements was listed as the owner of the machines.

7. William Scurry held retail licenses for Flamingo II, III, and IV.

8. On June 13, 1996, the Department issued two Regulatory Violations and Proposed Assessment Reports against Hilton Head Amusements, JV Amusements, Hindman Music Company, and William Scurry. In the first report, the Department alleged a violation of the single place or premises requirements of S.C. Code Ann. § 12-21-2804(A) and S.C. Code Regs. 117 § 190. Specifically, the Department alleged that the operator of the businesses failed to "have at least one separate employee on the premises during business hours." In the second report, the Department alleged a violation of the S.C. Code Ann. § 12-21-2748, failure to affix owner identification on the four Class III video game machines located in Flamingo II. Hilton Head Amusements was not named as a party in this matter.

9. The Department agents left a copy of both reports with S. Brock, the employee on duty on the date of inspection.

10. The Department issued a Final Determination and Amendment of Violation on November 12, 1996, which further alleged a violation of S.C. Code Ann. § 12-21-2804(A) and S.C. Code Regs. 117 § 190, failing to have separate utility meters for each business entity, in addition to, alleging failure to have "one separate employee" on the premises during business hours. On November 14, 1996, the Department issued a Final Determination on the alleged violation of the S.C. Code Ann. § 12-21-2748, failure to affix owner identification on the four Class III video game machines located in Flamingo II.

11. The Department seeks a $5,000 fine against William Scurry, d/b/a Flamingo II, Flamingo III, and Flamingo IV for the alleged violations of S.C. Code Ann. § 12-21-2804(A) (Supp. 1995), a $2,500 fine for failure to affix owner/operator identification to one of the machines located in Flamingo II, revocation of the nine video game machine licenses owned by William Scurry and located at 1468 Edgefield Highway, North Augusta, South Carolina on the date of inspection, and preclusion of the issuance of video game machine licenses at the location for six months from the date of license revocation.







CONCLUSIONS OF LAW AND ANALYSIS

A. Jurisdiction

1. Pursuant to S.C. Code Ann. § 12-4-30(D) (Supp. 1995) and S.C. Code Ann. § 1-23-320 (Supp. 1995), the Administrative Law Judge Division has jurisdiction to hear this matter.

B. Single Place of Premises Violation

2. Respondent is a licensee of video game machines licensed under S.C. Code Ann. § 12-21-2720(A)(3) (Supp. 1995).

3. 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 found at S.C. Code Ann. § 12-21-2770, et seq. (Supp. 1995). 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 1994 Op. Atty. Gen. No. 94-21 at 51; Reyelt v. S.C. Tax Comm'n, 6:93-1491-3 and 6:93-1493-3 (U.S. Dist. Ct., Greenville, S.C., Nov. 15, 1993).

4. Petitioner alleges that on June 13, 1996, respondent violated S.C. Code Ann. § 12-21-2804(A) and 27 S.C. Code Regs. 117 § 190 (Supp. 1995) by permitting licenses to be used for the operation of more than five (5) Class III video game machines 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).

5. 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 Faile v. S.C. Employment Sec. Comm'n, 267 S.C. 536, 230 S.E.2d 219 (1976); Young v. S.C. Dep't of Highways and Pub. Transp., 287 S.C. 108, 336 S.E.2d 879 (1985). Specifically, 27 S.C. Code Regs. 117 § 190 was promulgated to clarify the meaning of the phrase "single place or premises" as set forth in Section 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.

S.C. Code Regs. 117 § 190 (1995) (emphasis added).

6. The first issue before this tribunal is whether any person "permitted" the use of permits or licenses for the operation of more than five Class III video game machines at a single place or premises, in violation of S.C. Code Ann. § 12-21-2804(A) and 27 S.C. Code Regs. 117 § 190.

7. 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 Assoc., 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. S.C. Public Service Authority, 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. Bryant v. City of Charleston, 295 S.C. 408, 368 S.E.2d 899 (1988); Home Health Service v. S.C. Tax Comm'n, 312 S.C. 324, 440 S.E.2d 375 (1994). 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).

8. The facts of this case clearly indicate that there were at least nine operational Class III video game machines located in the three businesses during business hours on June 13, 1996. There were four operational Class III video game machines located in Flamingo II, five operational Class III video game machines in Flamingo III, and three operational stations of a Class III multi-station Black Jack machine in Flamingo IV during business hours. More specifically, on the date of inspection the facts were as follows: the doors to each room containing video game machines were open; and, the lights were on inside each of these rooms. Further, there was only one employee in the location, who was situated in the common area. There were no employees in any of the businesses in which the video game machines were located. Further, a customer was present in one of the three rooms. Similarly, each of the three video game rooms had separate electric meters attached to the wall, however, the meters were not operational at the time of inspection. The dials on the meters read "00000" and the wheels were not turning. Furthermore, the entire location functioned from a single electrical meter attached to the outside of the trailer.

9. 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 Section 12-21-2804(A).

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 Section 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 S.C. Dep't of Revenue and Taxation v. Mickey 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. S.C. 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). In the instant case, the uncontroverted evidence indicates that there was only one employee in the common area at the time of the inspection, and no employees were working in the game rooms. Furthermore, the evidence indicates that the businesses were open for business at the time of inspection.

Secondly, S.C. Code Regs. 117 § 190 requires each business entity to have a separate electric utility meter. It is clear from the facts of this case that the utility meters attached to the walls of the rooms of the respective businesses were not functional or operational at the time of inspection, as indicated by the dials reading "00000" and the wheels not turning. Certainly, it is the intent of the regulation that the electric meters be functional. Any other construction of this regulation would be absurd. See Carolina Power & Light v. Town of Pageland, __ S.C. __, 471 S.E.2d 137 (1996) (court should construe a statute so as to escape an absurd result and carry the intention into effect); Stone v. State (City of Orangeburg), 313 S.C. 533, 443 S.E.2d 544 (1994).

The licensee has failed to meet the employee and separate utility meter requirements set forth in S.C. Code Regs. 117 § 190. Failing to satisfy each requirement alone is a sufficient ground constituting a violation of the single place or premises requirements of S.C. Code Ann. § 12-21-2804(A) (Supp. 1995). Therefore, I conclude that the businesses located at 1468 Edgefield Highway, North Augusta, South Carolina have violated Section 12-21-2804(A) by permitting licenses to be used for the operation of more than five Class III video game machines in a single place or premises. Consequently, respondent's Class III licenses are subject to revocation.

C. Constitutional Challenge of Regulation

10. Respondent challenges the validity of 27 S.C. Code Regs. 117 § 190. Pursuant to S.C. Code Ann. § 12-21-2798 (Supp. 1995), the Department is authorized to promulgate regulations to assist in the administration and enforcement of the Video Game Machines Act.

11. To determine if a regulation is reasonable, inquiry must be made as to whether the regulation has a rational basis or is rationally related to the end sought to be achieved. Hunter & Walden Co. v. S.C. State Licensing Bd. for Contractors, 272 S.C. 211, 251 S.E.2d 186 (1978). That is, a regulation is valid as long as it is reasonably related to the purpose of the enabling legislation. Young v. SCDHPT, 287 S.C. 108, 336 S.E.2d 879 (Ct. App. 1985). However, a regulation which is beyond the authorization of the agency's enabling legislation or which materially alters or adds to the law is invalid. Society of Professional Journalists v. Sexton, 283 S.C. 563, 324 S.E.2d 313 (1984); Banks v. Batesburg Hauling Co., 202 S.C. 273, 24 S.E.2d 496 (1943). Regulation 117 § 190 does not lessen or enlarge the powers of the Department, but is reasonable for the enforcement of the provisions of S.C. Code Ann. § 12-21-2804(A). The requirements of Regulation 117 § 190 do not constitute an impermissible alteration or addition to Section 12-21-2804(A). Instead, the regulation clarifies the phrase "single place or premises" in order to allow for uniform enforcement of the law. Furthermore, the regulation is reasonably related to and is designed to further the purpose of the Video Game Machines Act.

D. Owner/Operator Identification

12. Petitioner alleges that respondent violated S.C. Code Ann. 12-21-2748 (Supp. 1995), by failing to affix owner/operator identification to one of the machines located in Flamingo II on June 13, 1996. S.C. Code Ann. § 12-21-2748 provides:

Any person who owns and operates devices described in §§ 12-21-2720 and 12-21-2730 must have attached to the machine information identifying the owner or operator of the machine. The identification must be placed on an area of the machine which is visible for inspection purposes. This identification is a condition precedent before the machines may be operated on location. Failure to comply with this requirement subjects the violator to the penalty and enforcement provisions of this chapter and Chapter 54 as applicable.



(emphasis added). In the instant case, the licensee failed to comply with the literal mandate of the statute. On June 13, 1996, the video game machine located in Flamingo II, which was licensed to respondent William Scurry, did not have owner/operator identification affixed. The Department's agent testified that he found owner/operator identification on the video game machines located in Flamingo III and Flamingo IV, but was unable to find any owner/operator identification on the video game machines located in Flamingo II. Respondent failed to present any concrete evidence to the contrary which would contradict the Department's allegation that no owner/operator identification was affixed to respondent's video game machine located in Flamingo II. It is, therefore, concluded that respondent violated S.C. Code Ann. § 12-21-2748 (Supp. 1995).

E. Penalty

13. S.C. Code Ann. § 12-21-2804(A) (Supp. 1995) 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. This section 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 import of this language is to preclude an establishment which has had a license revoked from operating for a six month period. 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. S.C. 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).

14. S.C. Code Ann. § 12-21-2804(F) (Supp. 1995) provides that a person who violates S.C. Code Ann. § 12-21-2804(A) (Supp. 1995) is subject to a fine of up to $5,000.

15. S.C. Code Ann. § 12-21-2738 provides statutory guidelines for the imposition of

penalties for violations of Article 19, which is the article in which the Video Game Machines Act is located. This section provides:

A person who fails, neglects, or refuses to comply with the terms and provisions of this article or who fails to attach the required license to any machine, apparatus, billiard, or pocket billiard table, as herein required, is subject to a penalty of fifty dollars for each failure, and the penalty must be assessed and collected by the commission.

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. . . .



S.C. Code Ann. § 12-21-2738 (Supp. 1995).







ORDER

Based upon the foregoing Findings of Fact and Conclusions of Law, IT IS HEREBY ORDERED that the Department shall revoke the video game machine licenses owned by William Scurry and located at 1468 Edgefield Highway, North Augusta, South Carolina on June 13, 1996, and no video game machine licenses shall be utilized at 1468 Edgefield Highway, North Augusta, South Carolina for six months from the date of the revocation of the licenses.

IT IS FURTHER ORDERED that the Department shall sustain the monetary fines imposed against William Scurry, d/b/a Flamingo II, Flamingo III, and Flamingo IV.

IT IS FURTHER ORDERED 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



March 6, 1997

Columbia, South Carolina


Brown Bldg.

 

 

 

 

 

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