ORDERS:
FINAL DECISION
STATEMENT OF CASE
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 (5) video poker
machines in a "single place or premises." A Hearing was held before the Administrative Law Judge
Division on June 10, 1997.
I find the Respondents did not violate 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 Respondents.
2. The Department originally issued a violation report against Stardust Amusement Company;
Hester W. Wyatt, d/b/a Mom's Center and Truck Stops, Inc., charging the Respondents with
operating in violation of S.C. Code Regs. § 117-190 (Supp. 1996) by not having "at least one
separate employee on the premises during business hours." The Department moved to dismiss
Hester W. Wyatt, d/b/a Mom's Center and Truck Stops, Inc., on the ground that Hester W. Wyatt
was deceased and Truck Stops, Inc.'s corporate charter had been dissolved. Pursuant to Order of the
undersigned dated March 26, 1997, this action was dismissed against Hester W. Wyatt, and pursuant
to Order of the undersigned dated April 1, 1997, this action was dismissed against Truck Stops, Inc.
The Department, thereafter, moved to join Thomas H. Starnes, d/b/a Midway Truck Stop and
Tommy's. The Respondent, Stardust Amusement Company, was the owner of the machines placed
at the location. However, the Respondent, Thomas H. Starnes, began leasing the property after the
alleged violation on June 13, 1996 and the death of Hester W. Wyatt, the owner of the property. The
Department sought the joinder of Thomas H. Starnes because it is seeking to have the location
disqualified for six (6) months for the alleged violation. With the Parties' consent the above parties
were joined in this case by my Order dated April 3, 1997.
3. The Department's agents conducted an inspection at Mom's Center and Truck Stops on June
13, 1996. The Respondents' location was a mall-type arrangement housing two video game rooms.
Each room contained five (5) Class III video game machines. The game rooms in Mom's Center and
Truck Stops were open and the machines in these rooms were on and operational. There were no
customers in either room. Additionally, there were two employees of each respective game room
standing at or near the individual gaming rooms. Though the two employees were not actually in
the confines of the individual gaming rooms, they were standing in the area between the two rooms
within five feet of each room. In fact, the Department's agents testified that a customer could not
gain entrance to the gaming rooms without walking by the employees who were standing
immediately outside the gaming rooms.
4. I find that the Respondent, Stardust Amusement Company, was not in violation for failing
to have at least one separate employee on the premises during business hours.
CONCLUSIONS OF LAW
Based upon the 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 Respondent 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 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.
8. The Department contends that the Respondent violated Regulation 117-190 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 or
premises" 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 each game room 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.
If the Department's evidence shows that no employee was working within the four walls of
the Respondent's businesses, the Department has established a prima facie case or a rebuttable
presumption that the business is not a "single place or premises." 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.
9. The Department, in its Prehearing Statement, alleges that the Respondent's retail licenses
were not valid and thus they operating in violation S.C. Code Regs. § 117-190. However, neither the
Violation Report nor the Final Decision of the Department were based upon the validity of the retail
license. Determining an issue that a party was not given proper notice of prior to the hearing,
violates fundamental notions of due process. Burdge v. State Board of Medical Examiners, 304 S.C.
42, 403 S.E.2d 114 (1991). Therefore, this Court will not address the issue regarding the validity
of the retail licenses, as Respondents did not have sufficient notice of this issue prior to trial.
ORDER
Based upon the Findings of Fact and Conclusions of Law, it is hereby:
ORDERED that the Respondents did not violate S.C. Code Ann. § 12-21-2804(A) (Supp.
1996) and that the violations issued against the Respondents are hereby dismissed.
AND IT IS SO ORDERED.
___________________________
Ralph King Anderson, III
Administrative Law Judge
Columbia, South Carolina
July 15, 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. |