ORDERS:
FINAL DECISION
STATEMENT OF CASE
This matter comes before me upon request for a Hearing by the Respondent 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 Respondent operated more than five video poker
machines in a "single place or premise." A Hearing was held before the Administrative Law Judge
Division on April 17, 1997.
I find the Respondent violated Section 12-21-2804 (A).
FINDINGS OF FACT
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 Timbes Architecture on June 13, 1996,
charging the Respondent with having 35 Class III video game machines in Tycoons Gallery of
Games (Tycoons Gallery). The Department offered no evidence as to whether each business located
in Scott's 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 June 13, 1996, Department agents conducted an inspection of Tycoons Gallery at 1900
N. 17th Avenue, Surfside Beach, South Carolina. The Respondent's location was a mall type
arrangement housing fifteen video gaming rooms. The Department contends that seven of the fifteen
rooms were open. I find that Tycoons Gallery Game Rooms 5, 6, 7, 9, 10 and 11 were open for
business. Each of the six open game rooms contained five Class III video game machines. The
machines in these open rooms were all on and operational.
4. The doors leading into rooms 5, 6, 7 and 10 were open. There were no "Closed" signs on the
doors or at the entryways leading into any of these game rooms. A customer was playing a machine
in room 13. Furthermore, the overhead lights were on in each room as well.
5. There was a"Closed" sign on the door leading into game rooms number 8. However, the door
leading into room 11 was open and a customer was in the room playing a machine.
6. When the Department's agents arrived, the door leading into room 9 was open. However,
during the Department's inspection, the door to room 9 was closed. Additionally, there were no
"Closed" signs on the door or at the entryway leading into the room and the overhead lights in that
room were on.
7. The Department failed to meet their burden of proof that room 12 was open. Though the light
and machines were on, the door was closed and no customers were in the room playing the machines.
8. The thirty (30) Class III machine licences located in the above open businesses were owned
by Tycoons Gallery. The following video game machine permits were located in the respective game
rooms:
Tycoons Gallery 5
036150
036149
036148
036146
036147
Tycoons Gallery 9
036211
036144
036145
036151
36152
Tycoons Gallery 6
036174
036175
036184
036183
036185
Tycoons Gallery 10
036157
036156
036155
036154
036153
Tycoons Gallery 7
036190
036189
036188
036187
036186
Tycoons Gallery 11
036159
036158
036161
036160
036162
9. Six employees were located on the premises of Tycoons Gallery; however, none of these
employees were in any of the game rooms. Two of the employees were in the commons area in the
middle of the structure, two were in the bar/grill area and one was outside the building.
10. The Respondent's Class III machine permits in Room B expire on May 31, 1997. The
Department seeks the imposition of a Five Thousand ($5,000.00) Dollar fine against the Respondent,
revocation of the machine permits and the restriction that no permit be issued for the Respondent's
location for six months.
11. The Respondent had a sufficient number of employees at the location to service the open
game rooms. However, though two of the employees were in a position that they could be summoned
to assist the two customers present, the Respondent failed to have employees located within the open
game rooms. I find therefore that the Respondent violated S.C. Code Ann. § 12-21-2804(A) by
failing to have "at least one separate employee" in each of the open game rooms. I further find that
the appropriate fine in this case is a Five Hundred ($500.00) Dollar fine for each violation.
CONCLUSIONS OF LAW
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). Section 2804(A) prohibits the operation of more than five video game
machines authorized under S.C. Code Ann. § 12-21-2720(A)(3) at a "single place or premises."
However, the Video Game Machines Act does not define the term "single place or premises." On
June 23, 1995, 27 S.C. Code Regs. 117-190 (Supp. 1996) became effective. It defines "single place
or premises" for purposes of interpreting the Video Game Machines Act, including Section 12-21-2804(A). It provides:
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 fire walls
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 fire walls 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 separate sales tax
licenses? 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.
Regulation 117-190 sets forth that multiple video poker businesses are allowed under one
roof. In this case, the Respondent complied with the structural requirements of Regulation 117-190.
However, at the time of the Department's inspection, some of the businesses did not have an
employee present. The Department contends that the Respondent violated the above regulation and
statute by failing to maintain an employee in each business. The Department asserts that if an
employee is not within the four walls of the business at the time of an inspection, the business is not
a single place of premise as defined in regulation 117-190. Therefore, the Department insists that
the mere absence of an employee from the business constitutes conclusive proof that the owner
violated the statute.
The Respondent contends that the Department interpretation of "premises" is "so rigid,
narrow, impractical and nonsensical that it furthers neither the literal interpretation nor the presumed
intent of the legislature." To the contrary, the Department argues that this criterion is necessary to
curtail casino type operations in South Carolina. However, the Department cannot curtail such
operations by violating the Respondent's due process rights or by applying fundamentally flawed
reasoning. Furthermore, the Department's approval of multiple video game businesses under one
roof created the very quagmire they seek to rectify by requiring that an employee remain within the
four walls of the business at all times.
In order to meet constitutional due process standards, a statute and therefore a regulation
must give sufficient notice to enable a reasonable person to comprehend what is prohibited. State
v. Crenshaw, 274 S.C. 475, 266 S.E.2d 61, cert. denied, 449 U.S. 883, 101 S.Ct. 236, 66 L.Ed. 2d
108 (1980); Toussaint v. State Board of Medical Examiners, 303 S.C. 316, 400 S.E.2d 488 (1991)
(the constitutional standard for vagueness is the practical criterion of fair notice to those to whom
the law applies). Furthermore, penal statutes must be strictly construed against the state in favor of
the citizen. Feldman v. S.C. Tax Commission, 203 S.C. 49, 26 S.E.2d 22 (1943). In that regard,
Regulation 117-190 does not specifically state that, if an employee is not on the premises at all times,
then a violation is presumed.
The Department's interpretation that an employee must physically remain within the four
walls of each video game room at all times is based upon the presumption that all businesses
maintain employees on the premises at all times, otherwise, the business is closed.(1) Therefore, the
Respondent's business should have been closed, as each game room did not have an employee on
the premises. Pursuant to that conclusion, the Department applies an irrebuttable or conclusive
presumption that once the Department shows that an employee is not on the premises, that business
does not qualify as a single place or premise.
Application of the proposition that the businesses should be closed whenever an employee
leaves the premises creates a bright line standard to follow in future cases. A bright line test certainly
creates both clarity and a straightforward method of dealing with this issue. However, if the bright
line standard is not clearly supported by unassailable facts it becomes a standard of convenience that
is simply not supported by due process. "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, 312 S.E.2d 716 (S.C. App. 1984).
To declare the existence of a presumption of fact, the court must determine that "the result
presumed must be one which a reasonable person would draw from certain facts which have been
proven to him. Its basis is logic [sic], its source is probability, and it rests on the observed
connection between facts." Lawrence v. Southern Ry., 169 S.C. 1, 167 S.E. 839 (1933). I do not find
support in the general knowledge of how businesses are conducted that all businesses, especially
those in a "mall type" setting, close every time an employee steps out of the business. It is
foreseeable that an employee of a business in a mall setting could step out of the business
momentarily to service a customer's needs or for some business or personal reason.
The Department's inspection revealed that no employee was working within the four walls
of the Respondent's businesses. That evidence establishes a prima facie case or a rebuttable
presumption that the business is not a single place or premise. The rebuttable presumption is
supported by the general knowledge that businesses do not operate for any extended period of time
without their employees present. Additionally, an employee's role and on-the-job conduct is within
the Respondent's control. Therefore, once the Department establishes a prima facie case, the burden
shifts to the Respondent to produce evidence that the business actually had a separate employee
specifically assigned to that business. See, Stanley Smith & Sons v. D.M.R., Inc., 307 S.C. 413, 415
S.E.2d 428 (Ct. App. 1992). Furthermore, the Respondent must demonstrate that the employee's
absence from the game room was of short duration and reasonable under the circumstances. A
violation of Reg. 117-190 will still occur whenever an employee is absent from the premises for a
prolonged period of time, or the reasons for the absence does not involve a reasonable business or
personal need. Such determinations will depend greatly on the specific factual circumstances, and
must be evaluated on a case-by-case basis.
An administrative regulation is valid so long as it is reasonably related to the purpose of the
enabling legislation. Hunter & Walden Co. v. S.C. State Licensing Bd. for Contractors, 272 S.C.
211, 251 S.E.2d 186 (1978). In Young v. South Carolina Dept. of Highways and Public Transp., 287
S.C. 108, 336 S.E.2d 879 (S.C. App. 1985) the Court upheld a Highway Department's regulation
which defined the term"transient or temporary." The Court held:
While the General Assembly did not define "transient or temporary" by statute, it has
implicitly authorized the Department to interpret, clarify and explain the statute by
authorizing the Department to promulgate regulations governing outdoor sign
permits. Administrative agencies may be authorized " 'to fill up the details' by
prescribing rules and regulations for the complete operation and enforcement of the
law within its expressed general purpose." Heyward v. South Carolina Tax
Commission, 240 S.C. 347, 355, 126 S.E.2d 15, 19-20 (1962); 73 C.J.S. Public
Administrative Law and Procedure Section 67 (1983) (in the first instance, defining
a particular statutory term is an administrative function). We hold the Department's
definition is not overly restrictive and further the definition provides specific time
limitations which will assure that the statute will be applied in a consistent manner.
See Boucher Outdoor Advertising Co. v. Minnesota Department of Transportation,
347 N.W. 2d 88, 91 (Minn. App.1984).
In this case the General Assembly did not define the term "single place or premises." However, S.C.
Code Ann. § 12-21-2798 (Supp. 1996) provides that "[t]he commission shall promulgate rules and
regulations pertaining to the machines and persons licensed by it." Therefore, the Department was
authorized to clarify the phrase "single place or premises" contained in Section 12-21-2804(A).
Furthermore, Regulation 117-190, as applied above, is not an overly restrictive definition of that
term.
3. The Respondent argues that the Department is using different definitions of "premises" in
applying S.C. Code Ann. § 2804 (A) and the Regulation 117-190. The Respondent argues that the
Department uses a definition of "premises" to mean the space within the four walls of the video
game room to determine whether the business failed to have an employee upon the "premises."
However, once a violation is claimed by the Department, the individual businesses and common
areas contained within the entire structure all become "premises" for the purpose of determining a
violation of the five machine limitation. Afterwards, the Department reverts to the narrow definition
of "premises" for purposes of assessing a penalty.
The Respondent contends that S.C. Code Ann. § 2804 (A) and the Regulation 117-190 are
unconstitutionally vague if they require different definitions for "premises." However, I do not find
that the statute or regulation applies different definitions concerning the term "premises." "The
constitutional standard for vagueness is the practical criterion of fair notice to those to whom the law
applies." Toussaint v. State Bd. of Medical Examiners, 303 S.C. 316, 400 S.E.2d 488 (1991).
Similarly, in City of Beaufort v. Baker, 315 S.C.146, 432 S.E.2d 470 (1993), the Court stated:
In determining whether a statute is vague, we have held: The concept of vagueness
or indefiniteness rests on the constitutional principle that procedural due process
requires fair notice and proper standards for adjudication. The primary issues
involved are whether the provisions of a penal statute are sufficiently definite to give
reasonable notice of the prohibited conduct to those who wish to avoid its penalties
and to apprise judge and jury of standards for the determination of guilt. If the statute
is so obscure that men of common intelligence must necessarily guess at its meaning
and differ as to its applicability, it is unconstitutional.
I find that Regulation 117-190 is not unconstitutionally vague.
4. The Department contends that if any game room is not a single place or premise then the
entire "mall setting" is one single place or premise. Therefore, every license for each machine
located upon the premises of the video poker mall is subject to revocation. This result would be true
whether or not the game room violating the regulation had any business connection with the other
game rooms located within the same mall area. "Court [s] must avoid construing a statute so as to
lead to an absurd result." Stone v. State, 313 S.C. 533, 443 S.E.2d 544 (1994).
I find that each of the game rooms that failed to have a separate employee working within
its confines at the time of the Department's inspection is considered a "single place or premises"
pursuant to the requirements of S.C. Code Ann. § 12-21-2804(A) (Supp. 1996). Therefore, any fine
or punishment imposed against those businesses would not necessarily be imposed against the whole
structure.
5. Machines permitted 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).
6. 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
permits of machines located in the establishment.
7. 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.
8. 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.
ORDER
Based upon the Findings of Fact and Conclusions of Law, it is hereby:
ORDERED that the following permits for the thirty Class III video game machines located in
Tycoons Gallery game rooms 5, 6, 7, 9, 10 and 11 at 1900 N. 17th Avenue, Surfside Beach, South
Carolina, are hereby revoked:
Tycoons Gallery 5
036150
036149
036148
036146
036147
Tycoons Gallery 9
036211
036144
036145
036151
036152
Tycoons Gallery 6
036174
036175
036184
036183
036185
Tycoons Gallery 10
036157
036156
036155
036154
036153
Tycoons Gallery 7
036190
036189
036188
036187
036186
Tycoons Gallery 11
036159
036158
036161
036160
036162
IT IS FURTHER ORDERED that a fine of Five Hundred ($500.00) Dollars is imposed
for each offense upon the Respondent, resulting in a total fine of Three Thousand ($3,000.00)
Dollars.
IT IS FURTHER ORDERED that no permits shall be issued for any Class III machine to
be operated in any of the above game rooms for a period of six (6) months from the date of this Final
Decision.
AND IT IS SO ORDERED.
___________________________
Ralph King Anderson, III
Administrative Law Judge
Columbia, South Carolina
June 16, 1997
1. If the Department's reasoning is not based upon the premise that all businesses maintain employees on
the premises at all times, otherwise the business is closed, then their reasoning is flawed. If all businesses do not
close when an employee leaves the premises, their conclusion is based upon the premise that some or most
businesses maintain employees on the premises at all times, otherwise the business is closed. Creation of an
irrebuttable presumption based upon historical facts that sustain the presumption only under some, but not all of the
possible circumstances would be fundamentally unfair. |