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. Beverly Barton, et al

AGENCY:
South Carolina Department of Revenue

PARTIES:
Petitioners:
South Carolina Department of Revenue

Respondents:
Beverly Barton, Amy Broom, A Partnership, d/b/a Vegas Place IV, Inc., Vegas Place I, Inc.,Vegas Place III, Inc.
 
DOCKET NUMBER:
97-ALJ-17-0105-CC

APPEARANCES:
Carol I. McMahan
Attorney for Petitioner

David E. Belding
Attorney for Respondents
 

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. 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 S.C. Code Regs. 117-190 (Supp. 1996).

For alleged violations of S.C. Code Ann. § 12-21-2804(A), the Department seeks a $5,000 fine against Vegas Place I, Inc., a $5,000 fine against Vegas Place III, Inc., a $5,000 fine against Beverly Barton and Amy Broom, d/b/a Vegas Place IV, revocation of fifteen Class III video game machine licenses located at 801 South Kings Highway, Myrtle Beach, South Carolina on June 13, 1996, and preclusion of the use of any Class III video game machine licenses at 801 South Kings Highway, Myrtle Beach, South Carolina for a period of six months from the date of revocation.

The hearing of this matter was held on Tuesday, June 24, 1997. The issues before this tribunal are (1) whether Respondents violated S.C. Code Ann. § 12-21-2804(A) and S.C. Code 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 Respondents violated S.C. Code Ann. § 12-21-2804(A) and S.C. Code 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 Vegas I, Vegas III, or Vegas IV for a period of six months from the date of revocation of the licenses. Further, the Department shall impose a fine of $2,500 against Vegas I, a fine of $2,500 against Vegas III, and a fine of $2,500 against Vegas IV.

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 agent, Robert Lee, conducted an inspection of the video gaming businesses located at 801 South Kings Highway, Myrtle Beach, South Carolina.

2. At the time of inspection, the facts relating to the "single place or premises" requirement of S.C. Code Ann. § 12-21-2804(A) and 27 S.C. Code Regs. 117 § 190 (Supp. 1996) were as follows:

a. The video gaming businesses were housed in a mall-type structure.

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

c. The main entrance doors of the structure were unlocked and the lights were on in the common area.

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

e. Six video gaming businesses were located in six separate rooms which opened into the common area. The interior doors to three of the businesses were closed and are not subject to the dispute in question.

f. Three of the six entities containing Class III video game machines, Vegas I, III, and IV, were open for business. The interior doors to Vegas I, III, and IV were open and the lights were on inside these three rooms. The video game machines in these three businesses were turned on and available for play.

g. Vegas I, Vegas III, and Vegas IV each contained five licensed Class III video game machines. There was a customer present in Vegas I and a customer present in Vegas IV.

h. There were no employees located inside any of the entities containing video game machines. Particularly, no employees were present on the premises of Vegas I, III, or IV, which were open for business. There were two employees located in the common area of the structure. Specifically, one employee was seated behind the payout counter and the other was seated on a sofa in the common area.

Respondents contend that the door to Vegas III was open to air a frequently occurring odor. Respondent Beverly Barton testified that she was at the location around noon on the date of inspection, at which time Vegas III was open for business. Respondents further contend that there should have been more than two employees present at the location during the time of inspection because of a shift change scheduled to occur at that time. However, the evidence indicates that there were no employees within the premises of Vegas I, Vegas III, or Vegas IV on June 13, 1997 at the time of inspection.

i. All of the video 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.

j. The video game rooms had separate electric meters.

k. Each of the video gaming businesses had separate sales tax licenses.

3. On June 13, 1996, the following Class III video game machine licenses were affixed to the machines in Vegas I, III, and IV and held by the corresponding licensee(s):

Business Entity License Number Licensee(s)

Vegas I 035517 Beverly Barton

Amy Broom

035519 Beverly Barton

Amy Broom

035511 Beverly Barton

Amy Broom

035516 Beverly Barton

Amy Broom

035518 Beverly Barton

Amy Broom

Vegas Place III 035515 Beverly Barton

Amy Broom

035505 Beverly Barton

Amy Broom

035512 Beverly Barton

Amy Broom

035513 Beverly Barton

Amy Broom

035514 Beverly Barton

Amy Broom

Vegas Place IV 035665 Beverly Barton

035508 Beverly Barton

Amy Broom

035509 Beverly Barton

Amy Broom

035510 Beverly Barton

Amy Broom

035506 Beverly Barton

Amy Broom

4. Vegas I, III, and IV are operated by Beverly Barton and Amy Broom at 801 South Kings Highway, Myrtle Beach, South Carolina.

5. Beverly Barton and Amy Broom held retail licenses for Vegas I, III, and IV.

6. Beverly Barton and Amy Broom were the licensees of fifteen Class III video game machines located in Vegas I, III, and IV on June 23, 1996.

7. Beverly Barton and Amy Broom are the owners of Vegas I, III, and IV. Beverly Barton and Amy Broom participated in the day-to-day management and operation of the video game machine businesses located at 801 South Kings Highway, Myrtle Beach, South Carolina. Further, evidence was presented to establish that Beverly Barton and Amy Broom applied for, received, maintained, and permitted to be used Class III video game machine licenses in contravention of Section 12-21-2804(A).

8. On June 13, 1996, the Department issued a Regulatory Violation and Proposed Assessment Report against Beverly Barton. In this 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 (Supp. 1996). Specifically, the Department alleged that the operator of the businesses and owner of the machine licenses failed to have at least one separate employee on each premises during business hours. A Final Department Determination and Amendment of Violation Report was issued on February 7, 1997.

9. The Department's agents left a copy of the violation report with the employees who were present on the date of inspection.

10. The Department seeks a $5,000 fine against Vegas I, a $5,000 fine against Vegas III, a $5,000 fine against Vegas IV, revocation of fifteen Class III video game machine licenses located at 801 South Kings Highway, Myrtle Beach, South Carolina on June 13, 1996, and preclusion of the use of any Class III video game machine licenses at 801 South Kings Highway, Myrtle Beach, South Carolina 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. Single Place or Premises Violation

2. Respondents Beverly Barton and Amy Broom are the licensees of 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.

3. Respondents Beverly Barton and Amy Broom are the operators of the Class III video game machines located at 801 South Kings Highway, Myrtle Beach, South Carolina, which are the subject of this case.

4. 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. S.C. Tax Comm'n, 6:93-1491-3 and 6:93-1493-3 (U.S. Dist. Ct., Greenville, S.C., Nov. 15, 1993); See also 1994 Op. Atty. Gen. No. 94-21 at 51.

5. Petitioner alleges that on June 13, 1996, Respondents violated S.C. Code Ann. § 12-21-2804(A) and S.C. Code 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).

6. 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. S.C. Dep't of Highways and Pub. Transp., 287 S.C. 108, 336 S.E.2d 879 (Ct. App. 1985); Faile v. S.C. Employment Sec. Comm'n, 267 S.C. 536, 230 S.E.2d 219 (1976). Specifically, 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 (1996) (emphasis added).

7. 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 S.C. Code Regs. 117-190.

8. 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 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 Service, Inc. v. S.C. 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 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, a business entity, as well as, a licensee or machine owner. See Black's Law Dictionary, 1142 (6th ed. 1995). Further, Section 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. Such an interpretation is consistent with the plain language of the statute.

9. The facts of this case clearly indicate that there were at least fifteen operational Class III video game machines, collectively, located in Vegas I, III, and IV on June 13, 1996. Vegas I, Vegas III, and Vegas IV each contained five operational Class III video game machines. The evidence further indicates that Vegas I, III, and IV were open for business at the time of inspection. There were two employees in the location, both of whom were situated in the common area. However, there were no employees on the premises of Vegas I, III, or IV.

10. The business owners, Beverly Barton and Amy Broom, 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.

11. 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).(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 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).

This tribunal finds the testimony of the Department's agents to be more credible than the testimony presented by Respondents' witnesses. The weight and credibility assigned to evidence presented at the hearing of a matter is within the province of the trier of fact. See S.C. 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). At the hearing of this matter, the testimony of the Department's agent, Robert Lee, appeared more credible than Respondents' witnesses who testified that Vegas III was open for the purpose of airing the room. Further, I conclude that the evidence indicates there were two employees in the common area at the time of the inspection, and no employees were present in Vegas I, III, or IV.

The Respondents have failed to meet the "one separate employee" requirement set forth in Regulation 117-190. 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 three of the businesses located at 801 South Kings Highway, Myrtle Beach, South Carolina were operated in violation of S.C. Code Ann. § 12-21-2804(A) by Respondents. Consequently, fifteen (15) of Respondents Class III video game machine licenses are subject to revocation.

C. Penalty

12. 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.

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

14. 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 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 operation 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) (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).

15. 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 Vegas I, Vegas III, and Vegas IV. The Department has established that Respondents 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. Under Section 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.

16. 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 Inv., 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, the Tax 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 of Laws, 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 an appropriate penalty based on the facts presented." Walker v. S.C. ABC Comm'n, 305 S.C. 209, 407 S.E.2d 633 (1991). With the advent of restructuring and the abolition of the Tax Commission, however, such authority has devolved to the Administrative Law Judge Division. This tribunal now hears "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). An administrative law judge, as the fact-finder, must also determine an appropriate 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. Additionally, the tribunal responsible for conducting the contested case proceeding has the authority to decide the issues based on the facts presented, and make the final decision on all the issues, including the appropriate penalty.

ORDER

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 following fifteen (15) video game machine licenses owned by Respondents Beverly Barton and Amy Broom, which were located at 801 South Kings Highway, Myrtle Beach, South Carolina on June 13, 1996 in the businesses known as Vegas I, III, and IV:

Business Entity License Number Licensee

Vegas I 035517 Beverly Barton

Amy Broom

035519 Beverly Barton

Amy Broom

035511 Beverly Barton

Amy Broom

035516 Beverly Barton

Amy Broom

035518 Beverly Barton

Amy Broom

Vegas Place III 035515 Beverly Barton

Amy Broom

035505 Beverly Barton

Amy Broom

035512 Beverly Barton

Amy Broom

035513 Beverly Barton

Amy Broom

035514 Beverly Barton

Amy Broom

Vegas Place IV 035665 Beverly Barton

035508 Beverly Barton

Amy Broom

035509 Beverly Barton

Amy Broom

035510 Beverly Barton

Amy Broom

035506 Beverly Barton

Amy Broom

IT IS FURTHER ORDERED that no video game machine licenses shall be utilized in Vegas I, III, or IV at 801 South Kings Highway, Myrtle Beach, South Carolina for a period of six months from the date of revocation of the licenses.

IT IS FURTHER ORDERED that the Department shall impose fines in the amount of $2,500 against Vegas I, $2,500 against Vegas III, and $2,500 against Vegas IV.

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





July 18, 1997

Columbia, South Carolina

1. S.C. Code Regs. 117-190 has been held to be "valid and enforceable and a valid exercise of the power of the . . . Department." McNickel's In. v. S.C. Dep't of Revenue, Court of Common Pleas, Beaufort County, No. 96-CP-07-1072 (June 6, 1997); See also AAA Entertainment Corporation, et al. v. S.C. Dep't of Revenue, Court of Common Pleas, Beaufort County, No. 96-CP-07-1595 (June 6, 1997); William Scurry v. S.C. Dep't of Revenue, Court of Common Pleas, Beaufort County, No. 97-CP-07-0408 (June 6, 1997). The 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.


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