SC Administrative Law Court Decisions

This matter comes before me upon Respondents' request for a contested case hearing after being cited by the South Carolina Department of Revenue (DOR) for administrative violations of S.C. Code Ann. § 12-21-2804(A) (Supp. 1996) of the Video Game Machines Act, and 27 S.C. Code Ann. Regs. 117-190 (Supp. 1996). The primary issue for determination is whether the Respondents violated R. 117-190 by not having "at least one separate employee on the premises during business hours."

A contested case hearing in this matter was held in Columbia, South Carolina, on

October 23, 1997. Based upon the relevant and probative evidence and the applicable law, I find Respondents violated R. 117-190 and S.C. Code § 12-21-2804. Accordingly, the ten machine licenses in the subject rooms are hereby revoked. No Class III machines shall be operated in the subject rooms at the location, which is 1514 Highway 17 N, Surfside Beach, South Carolina, for a period of six months. Respondent Landingham reached a settlement with DOR prior to the commencement of the hearing and agreed to pay a penalty of $1,000. No fine is imposed against C.S. Carter, d/b/a Carter Amusements.

By a preponderance of the evidence, I find:

1. On or about June 13, 1996, a video gaming business operated as EZ Win Video in a mall-type structure containing twenty-five Class III video game machines, five video-gaming rooms, and a common area at 1514 Highway 17 N, Surfside Beach, South Carolina,
2. Five Class III video game machines were located at each of the five rooms at the subject location.
3. Respondent Roger Landingham was the retail operator of EZ Win Video and managed the operation of the subject machines.
4. C.S. Carter, d/b/a Carter Amusements, is the licensee of the twenty-five Class III video game machines located at 1514 Highway 17 N, Surfside Beach, South Carolina.
5. C.S. Carter, d/b/a Carter Amusements placed the machines at the subject location and provided mechanical maintenance of the machines, but exercised no management control over the operation of the game rooms or its employees.
6. Revenue Officer David Dean inspected the video-gaming businesses at 1514 Highway

17 N, Surfside Beach, South Carolina, on June 13, 1996.

1. Two of the five rooms containing Class III machines at 1514 Highway 17 N were open for business at the time of the inspection, and the Class III video game machines within those rooms were on and operating.
2. The following video game machine licenses were affixed to machines located in the two open game rooms:

Room 1 Room 3

3801556 3801968

027521 3801969

027525 3801965

027519 3801967

027524 3801966

1. The doors from the commons area to these two subject rooms were open, the video poker machines were on and operating, and there were no indications that the two subject rooms were closed.
2. No employees were in the two open rooms at the time of the inspection.
3. The remaining three game rooms were closed for business and not in operation.
4. At the time of the inspection, two employees were located within the movie-rental area of 1514 Highway 17 N.
5. The inspection occurred at about the normal time for the daily opening of business.
6. Notice of the time, date, place and subject matter of the hearing was given to the Petitioner and Respondents.
7. On the record, at the commencement of the contested case hearing, Respondent Roger Landingham and Petitioner DOR announced a settlement agreement in which Landingham agreed to pay a $1,000 fine.

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 and decide this matter pursuant to the Administrative Procedures Act (APA), S.C. Code Ann. §§ 1-23-310 et seq. (1976 & Supp. 1996), S.C. Code § 12-4-30(D), and §§ 12-60-1310 through 12-60-1350 of the South Carolina Revenue Procedures Act (RPA).
2. The Video Game Machines Act, S.C. Code Ann. §§ 12-21-2770, et seq. (Supp. 1996) became effective on July 1, 1993, 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, 6:93-1491-3 and 6:93-1493-3 (U.S. Dist. Ct., Greenville, S.C., Nov. 15, 1993); see also 1994 Op. S.C. Att'y Gen. 21.
3. Video Game Machines Act § 12-21-2804(A) prohibits a person from applying for, receiving, maintaining, or permitting to be used permits for the operation of more than five Class III machines at a single place or premises.
4. DOR regulations clarify the meaning of "single place or premises" (for purposes of the Video Games Machines Act):

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).

1. Respondent Landingham failed to have "one separate employee" within each of the two subject rooms, in violation of R. 117-190.
2. Respondent Landingham violated S.C. Code Ann. § 12-21-2804 by operating video machines in locations failing to meet all requirements of the "single place or premises" criteria set forth in Regulation 117-190.
3. Under § 12-21-2804(A), a license on a video poker machine must be revoked by virtue of its misuse under the Act, regardless if the actual violator is the retail licensee, machine owner, or lessee. A monetary fine under § 12-21-2804(F), however, must be imposed only upon those persons directly involved in the management or operation of the location, in violation of

§ 12-21-2804(A).

1. Section 12-21-2804(F) (Supp. 1996) provides that a person who violates

§ 12-21-2804(A) is subject to a fine of up to $5,000.

1. Because C.S. Carter d/b/a Carter Amusements was merely the owner/licensee of the machines in question and exercised no control or management of the subject game rooms or its employees being operated by the retailers, Carter should not be assessed a monetary penalty for the failure to maintain a separate employee for each game room under the provisions of S.C. Code Ann. §§ 12-21-2804(A) and 12-21-2804(F).
2. The trier of fact must weigh and pass upon the credibility of evidence presented. See S.C. Cable Television Ass'n v. Southern Bell Tel. and Tel. Co., 308 S.C. 216, 417 S.E.2d 586 (1992). The trial judge is in the best position to weigh witnesses' demeanor and veracity and to evaluate their testimony. See Mann v. Walker, 285 S.C. 194, 328 S.E.2d (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).
3. Video Games Machines Act § 12-21-2804(A) provides that "[n]o 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."
4. Pursuant to ALJD Rule 29(B), any issues or motions raised at the hearing but not addressed in this Order are deemed denied.

ORDER

IT IS THEREFORE ORDERED that the following video game machine licenses owned by Respondent and located at 1514 Highway 17 N, Surfside Beach, are revoked:

Room 1 Room 3

3801556 3801968

027521 3801969

027525 3801965

027519 3801967

027524 3801966

IT IS FURTHER ORDERED that no Class III machines shall be operated in the two subject rooms at the location at 1514 Highway 17 N, Surfside Beach, South Carolina, for a period of six (6) months from the date of revocation of the licenses.

IT IS FURTHER ORDERED that, pursuant to agreement of the parties entered on the record at the hearing, Respondent Roger Landingham shall pay a monetary fine to DOR in the amount of One Thousand Dollars ($1,000).

AND IT IS SO ORDERED.

_____________________________

STEPHEN P. BATES

ADMINISTRATIVE LAW JUDGE

November 20, 1997

Columbia, South Carolina