SC Administrative Law Court Decisions

This matter comes before me pursuant to S.C. Code Ann. § 12-4-30 (D) (Supp. 1996) and S.C. Code Ann. § 1-23-600, et seq. (Supp. 1995) pursuant to a request for a contested case hearing by J. M. Brown Amusement Company, Inc., and Casino Games, Inc., d/b/a Winners, d/b/a Boardwalk, d/b/a Infield, d/b/a Backstretch, d/b/a Front Stretch, (collectively referred to as "Respondent"). The South Carolina Department of Revenue ("Petitioner" or "Department") issued a citation against Respondent for alleged administrative violations of S.C. Code Ann. § 12-21-2804(A) (Supp. 1996) of the Video Game Machines Act ("Act") and S.C. Code Regs. 117-190 (Supp. 1996) ("Regulation") at the business located at 4501 Highway 707(Socastee Boulevard), Myrtle Beach, South Carolina ("location"). Specifically, the Department alleges that Respondent did not have a separate employee within each of five single places or premises ("game rooms") at the location during business hours on June 13, 1996. Respondent denies any violation of the Act or the Regulation.

The Petitioner seeks revocation of twenty five (25) Class III video poker machine licenses at the location, a $5,000.00 fine against both J. M. Brown Amusement Co., Inc., and Casino Games, Inc., and an Order prohibiting the licensing of any Class III video poker licenses at the location for a period of six months from the date of the license revocation.

After timely notice to the parties, a contested case hearing was held at the offices of the Administrative Law Judge Division ("Division"), Columbia, South Carolina on October 20, 1997.

Based upon a thorough review of the record, the relevant and probative evidence and applicable law, I conclude that the Respondent did not violate S.C. Code Ann. §12-21-2804(A) or S.C. Code Regs. 117-190 on June 13, 1996 and that the citation against the Respondent should be dismissed.

ISSUES

1. Did Respondent violate the "single place" or "premises" provisions of S.C. Code Regs. 117-190 (Supp. 1996) and S. C. Code Ann. Section 12-21-2804(A) (Supp. 1996) by failing to have "one separate employee" within each of the six game rooms on June 13, 1996?

2. If there is a violation, what is the appropriate penalty?

EVIDENCE

Without objection, Petitioner placed into evidence the following exhibits:

Exhibit l: Four letters from Albert A. Reed, Revenue Law Advisor with the Office of General Counsel of the Department of Revenue, dated July 3, 1997 and June 16, 1997, addressed to C. Tyrone Courtney and the Respondent, advising of the Department's final determination in this matter.

Exhibit 2: Revenue Form FS-31 titled "Regulatory Violation and Proposed Assessment Report" and Revenue Form C-100 titled "Special Report," both dated June 13, 1996 and prepared by Revenue Officer Robert Gardner.

Exhibit 3: Two letters of representation from C. Tyrone Courtney, Attorney at Law, with regard to the alleged regulatory violations against Respondent.

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Exhibit 4: A drawing of the interior of the location called Winners World.

Exhibit 5: Copies of the Business Tax Applications by Casino Games, Inc., for the following retail businesses:

(1) "Boardwalk" located at 4501-A Suite # 2, Socastee Blvd. Myrtle Beach, S. C.;

(2) "Infield" located at 351 Hwy. 17 N., unit 103, Surfside Beach, S. C.;

(3) "Winners" located at 315 Hwy. 17 N., Surfside Beach, S. C.;

(4) "Backstretch" located at 351 Hwy. 17 N., unit 104, Surfside Beach, S.C.;

(5) "Front Stretch" located at 351 Hwy. 17 N., Unit 102, Surfside Beach, S. C.

Exhibit 6: Copies of Biennial Coin-Operated Device Applications by J. M. Brown Amusement Co., Inc., dated May 16, 1996 and May 18, 1995, for 135 and 165 Type III machines.

Exhibit 7: Two pages providing information on the separate video game machine rooms at the location and the license numbers on the Class III video game machines.

Exhibit 8: Requests for Admissions prepared by the Department and addressed to legal counsel for the Respondent, together with the response to the Requests for Admissions from Respondent and Answers to Interrogatories by the Respondent.

Robert B. Gardner, Jr., testified on behalf of the Petitioner. Respondent provided no testimony at the hearing.

FINDINGS OF FACT

Having carefully considered all testimony and arguments presented at the hearing, taking into account the credibility of the witness, the accuracy of the evidence and having reviewed all the exhibits carefully, I make the following findings by a preponderance of the evidence:

1. This Division has personal and subject matter jurisdiction.

2. Notice of the date, time, place and nature of the hearing was timely given to both parties.

3. Respondent, Casino Games, Inc., owns and operates separate video game businesses at the location. They are known and operated as Winners, Infield, Boardwalk, Back Stretch and Front Stretch. They have retail license numbers respectively as follows: 026391100, 026391306, 026396677, 026391315, and 026391299.

4. The President and sole owner of Casino Games, Inc., is Rudy L. Williams of West Columbia, South Carolina.

5. Each business operates within a separate room inside the building located at 4501 Highway 707 (Socastee Boulevard), Myrtle Beach, Horry County, South Carolina. See Petitioner's Exhibit # 4.

6. Each of the five game rooms listed in paragraph 3 above has five Class III video game machines located inside. The owner/licensee of the video game machines is J. M. Brown Amusement Co., Inc., of Gaffney, South Carolina. J. M. Brown is the President of this company.

7. All of these separate businesses are contained in individual rooms. Each room is surrounded by interior walls within the building which constitute exterior walls for purposes of each business. The only means of entry and exit to and from each room is through the foyer.

8. Located within the building are separate restrooms for ladies and gentlemen, an office and several storage rooms.

9. The license numbers on the machines located inside the various rooms are as follows:

Winners:

3808615, 3808616, 3808617, 3808619 and 3808620.

Boardwalk:

040511, 040653, 040665, 040666 and 040667.

Infield:

040607, 040608, 040609, 040615 and 040062.

Back Stretch:

3808621, 3808622, 3808623, 3808624 and 3808625.

Front Stretch:

040670, 040671, 040672, 040673 and 3808627.

10. Each of the game rooms or businesses has a separate State sales tax license and a separate electrical meter.

11. On June 13, 1996, at approximately 11:45 p.m., Revenue Officer Robert B. Gardner, Jr., went to the location at 4501 Highway 707, Myrtle Beach, Horry County, South Carolina. He entered into the front foyer and proceeded through the hallway which separates three rooms on one side from three rooms on the other. See Petitioner's Exhibit # 8, at page 5, number 4. He visited each of the six rooms which had video game machines located inside as shown on the drawing of its interior.

12. Officer Gardner observed the ceiling lights on in each room, the doors open leading into each room, and the video game machines turned on and operational for play in each room. He checked for licenses on each machine and observed that they were properly licensed.

13. During his visit, Officer Gardner saw nine employees within the building at the location. He observed these employees going in and out of each of the rooms on a continuous basis during his inspection.

14. There is a service counter in the hallway separating the rooms. When employees were not inside the individual rooms, they stood at a distance of no more than four to five feet outside the entrance to each room.

15. As a result of the inspection on June 13, 1996, Officer Gardner issued a citation to Respondent for not having an employee present within the physical premises of four game rooms or businesses.

16. I find that each of the six game rooms had an assigned employee on the premises on June 13, 1996, at the time the inspection was conducted by Officer Gardner.

CONCLUSIONS OF LAW

Based on the foregoing Findings of Fact and Discussion, I conclude, as a matter of law, the following:

1. Pursuant to S.C. Code Ann. § 12-4-30 (D) (Supp. 1996) and Chapter 23 of Title 1 of the 1976 Code, as amended, the South Carolina Administrative Law Judge Division has jurisdiction in this matter.

2. S.C. Code Ann. § 12-21-2804(A) (Supp. 1996) 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."

3. Machines licensed pursuant to the provisions of S.C. Code Ann. § 12-21-2720(A)(3) include video games with 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. Pursuant to S.C. Code Ann. § 12-21-2798 (Supp. 1996), the Department is authorized to promulgate regulations to assist in the administration and enforcement of the Video Game Machines Act.

5. S.C. Code Regs. 117-190 (Supp. 1996) defines "single place" or "premises" for purposes of interpreting the Video Game Machines Act, including § 12-21-2804(A). It provides as follows:

A "single place" or "premises" means a structure surrounded by exterior walls or fire walls 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.

(Emphasis added).

6. The second criterion of Regs. 117-190 requires that each separate game room have an employee on the premises during business hours. There is no requirement that the employee remain within the four walls of the premises every minute he is on duty. An individual employed to work in a specific game room from time to time may stand outside the room. If he continues to observe the game room and remains in control of its operation, standing ready to assist in the totality of its operation, this criterion is complied with.

In interpreting this regulation, the court must look to the purpose of the legislature in enacting § 12-21-2804(A) as a part of the Video Game Machines Act. Our courts have held that "all rules of statutory construction are subservient to the one that legislative intent must prevail if it can be reasonably discovered in the language used, and that language must be construed in the light of the intended purpose." Lewis v. Gaddy, 254 S.C. 66, 71, 173 S.E.2d 376, 378 (1970). The Supreme Court has stated that "the language of a revenue statute must not be extended beyond its clear import, the taxpayer being entitled to favorable resolution of any substantial doubt arising therefrom." Deering Milliken, Inc. v. S.C. Tax Comm'n, 257 S.C. 185, 187-88, 184 S.E.2d 711 (1971). The Court has further stated the rule that, "The legislature must have intended to mean what it has plainly expressed, and consequently there is no room for construction...." Beaty v. Richardson, 56 S.C. 173, 34 S.E. 73 (1899). The cardinal rule of statutory interpretation is to ascertain and effectuate the legislative intent wherever possible. Bankers Trust of South Carolina v. Bruce, 275 S. C. 35, 267 S. E. 2d 424 (1980). "Full effect must be given to each section of a statute, giving words their plain meaning, and in the absence of ambiguity, words must not be added or taken away." Hartford Accident and Indemnity Co. v. Lindsay, 273 S. C. 79, 254 S. E. 2d 301, 304 (1979). Thus, the phrase "on the premise" presumptively must have meaning. Therefore, the employees of a video poker business must be sufficiently connected to an open video game room as to indicate that each game room that is open for business has a specific employee assigned to work solely in that room.

The purpose of the Video Game Machines Act is to prevent large-scale casino type gambling operations in the State of South Carolina. Its intent is to limit each single place or premise to five machines. The Department has promulgated Regs. 117-190 to clarify the statute and to assist in its implementation. It has not and cannot add to or alter the statute. Society of Professional Journalists v. Sexton, 283 S.C. 563, 324 S.E.2d 313 (1984). The Department's interpretation of the statute, that a business entity must have an employee within the four walls of the business premises at all times, adds to and alters the statute. Criterion # (2) is reasonable in its interpretation and application only to the extent that it requires the employment of an individual at each place or business during working hours but not to the extent it requires the employee to remain with the confines of the business at all times. "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 (1944).

7. In this case, the evidence was uncontroverted that there were nine employees at the location. There were employees assigned to each of the six video game rooms. During the inspection visit by Officer Gardner, the assigned employees went in and out of each of the game rooms on a frequent basis. Although Officer Gardner cited Respondent for violations of the "separate employee" requirement against five of the six game rooms; he did not cite the other room, titled "Sunset," because the employee stayed inside the room. The evidence is clear that there were employees on the premises at all times while the Officer conducted the inspection, that they were assigned to the five rooms that were cited for violations, that they went in and out of each of the five game rooms on a frequent basis, in the presence of Officer Gardner.

I find and conclude that the Respondent has not violated the "single place" or "premises" nor the "separate employee" requirements of S.C. Code Ann. § 12-21-2804(A) and Reg. 117-190. To decide otherwise would lead to an absurd result.

8. A person found to have violated S.C. Code Ann. § 12-21-2804(A) (Supp. 1996) is subject to a fine of up to Five Thousand and no/100 ($5,000.00) Dollars and automatic revocation of the licenses of machines located in the establishment. Additionally, 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. However, I find that no violation occurred at the location on June 13, 1996.

9. Acting as fact-finder, it is the administrative law judge'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). If an administrative law judge finds and concludes that a violation has occurred, then he has the authority to establish the monetary fine within the allowable range provided for by S.C. Code Ann. § 12-21-2804(A) (Supp. 1996). S.C. Code Ann. § 12-4-30(D) (Supp. 1996).

10. An administrative law judge possesses the same powers at chambers or in open court as do circuit court judges and may issue such remedial writs as are necessary to give effect to its jurisdiction. S.C. Code Ann. § 1-23-630 (Supp. 1996).

ORDER

Based upon the foregoing Findings of Fact, Discussion and Conclusions of Law, it is hereby:

ORDERED that the violation(s) pending against the Respondent are dismissed.

AND IT IS SO ORDERED.

_______________________________________

Marvin F. Kittrell

Chief Judge

Columbia, South Carolina

November 18, 1997