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. Collins Entertainment Corp., et al

AGENCY:
South Carolina Department of Revenue

PARTIES:
Petitioners:
South Carolina Department of Revenue

Respondents:
Collins Entertainment Corp., Vito Finizio, d/b/a Treasure Island II, d/b/a Treasure Island III, d/b/a Treasure Island IV
 
DOCKET NUMBER:
97-ALJ-17-0386-CC

APPEARANCES:
Carol McMahan
Attorney for Petitioner

James H. Harrison
Attorney for Respondents
 

ORDERS:

ORDER AND DECISION

This matter is before this tribunal 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 December 12, 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 27 S.C. Code Ann. Regs. 117-190 (Supp. 1996).

For alleged violations of S.C. Code Ann. § 12-21-2804(A) (Supp. 1996), the Department seeks a $5,000 fine against Collins Entertainment Corp. and a $5,000 fine against Vito Finizio, revocation of fifteen (15) Class III video game machine licenses located at these businesses on December 12, 1996, and preclusion of the use of any Class III video game machine licenses at the businesses known as Treasure Island II, Treasure Island III, and Treasure Island IV, 773 Main Street, North Myrtle Beach, South Carolina, for a period of six months from the date of revocation.

The hearing of this matter was held on September 24, 1997. The issues before this tribunal are (1) whether Respondents violated S.C. Code Ann. § 12-21-2804(A) and 27 S.C. Code Ann. 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 Respondent Vito Finizio and the aforementioned businesses violated S.C. Code Ann. § 12-21-2804(A) and 27 S.C. Code Ann. 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 these businesses for a period of six months from the date of revocation of the licenses. Further, the Department shall impose a fine of $5,000 against Respondent Vito Finizio.

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 March 31, 1997, the Department issued Respondents an administrative citation for a violation of the "single place or premises" requirement of S.C. Code Ann. § 12-21-2804(A) and 27 S.C. Code Ann. Regs. 117-190 (Supp. 1996) alleged to have occurred on December 12, 1996. A Final Department Determination sustaining the citation was issued to the Respondents on June 6, 1997.

2. On December 12, 1996, Revenue Agent Phillip Grimsley conducted an inspection of the video gaming businesses located at 773 Main Street, North Myrtle Beach, South Carolina.

3. At the time of the inspection, the facts relating to the "single place or premises" requirement of the S.C. Code Ann. § 12-21-2904(A) and 27 S.C. Code Ann. Regs. 117-190 (Supp. 1996) were as follows:

a. There were four video gaming businesses housed in a mall-type structure. The four businesses were designated as Treasure Island I, Treasure Island II, Treasure Island III, and Treasure Island IV.

b. Vito Finizio holds the retail licenses to Treasure Island II, III and IV: Retail License #s 026-42493-1, 026-42494-0, and 026-42495-9, respectively.

c. There was a main entrance into the structure that opened into a common area.

d. Agent Grimsley entered the location on December 12, 1996 and was observed by an attendant situated at the counter in the common area. He proceeded to play a video gaming machine in Treasure Island II, III, and IV. Agent Grimsley played a video machine in each of these rooms for eight to ten minutes in each room.

e. No employees attended or were located in the rooms during the time of inspection.

f. No barriers were in place to restrict access to Treasure Island II, III, and IV.

g. Treasure Island II contained five (5) Class III video poker machines with the corresponding licenses affixed: #s 3805561, 3805549, 3805555, 3805559, and 3805560.

h. Treasure Island III contained five (5) Class III video poker machines with the corresponding licenses affixed: #s 034708, 036301, 036288, 034712, and 036289.

i. Treasure Island IV contained five (5) Class IV video poker machines with the corresponding licences affixed: #s 3805562, 3805563, 3805531, 3805501, and 3805530.

j. Collins Entertainment Corp. owns the video gaming machines located at Treasure Island II, III, and IV on December 12, 1996, and is also the licensee for the corresponding licenses affixed to the machines.

4. The Department seeks a $5,000 fine against Collins Entertainment Corp., a $5,000 fine against Vito Finizio, revocation of fifteen (15) Class III video game licenses located at these businesses on December 12, 1996, and preclusion of the use of any Class III video game machine licenses at these businesses 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. Burden of Proof

2. In civil cases, generally, the burden of proof rests upon the party who asserts the affirmative of an issue. 29 Am. Jur 2d Evidence § 127 (1994); Alex Sanders, et al., South Carolina Trial Handbook § 9:3 Party With Burden, Civil Cases (1994). The Department is the party asserting the affirmative in this case; therefore, the Department must prove by a preponderance of the evidence that Respondents failed to have a separate employee in each of their respective businesses in violation of S.C. Code Ann. § 12-21-2804(A) (Supp. 1996) and 27 S.C. Code Ann. Regs. 117-190 (Supp. 1996). The preponderance of the evidence "is evidence which is of the greater weight or more convincing than the evidence which is offered in opposition to it . . . ." Black's Law Dictionary 1182 (6th ed. 1990). "The preponderance of the evidence means such evidence as, when considered and compared with that opposed to it, has more convincing force and produces in the mind the belief that what is sought to be proved is more likely true than not true." Sanders, supra, § 9:5 Quantum of Evidence in Civil Cases (1994), (citing Frazier v. Frazier, 228 S.C. 149, 89 S.E.2d 225 (1955)).

C. Single Place or Premises Violation

3. Respondent Collins Entertainment Corp. is the licensee 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.

4. Respondent Vito Finizio is the operator of the Class III video game machines located in Treasure Island II, III, and IV, 773 Main Street, North Myrtle Beach, South Carolina, which are the subject of this case.

5. 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. South Carolina Tax Comm'n, Nos. 6:93-1491-3 and 6:93-1493-3 (D.S.C. Nov. 15, 1993); See also Op. Att'y Gen. 94-21 at 51 (1994).

6. Petitioner alleges that on December 12, 1996, Respondents violated S.C. Code Ann. § 12-21-2804(A) and 27 S.C. Code Ann. 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).

7. 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. South Carolina Dep't of Highways and Pub. Trans., 287 S.C. 108, 336 S.E.2d 879 (1985); Faile v. South Carolina Employment Sec. Comm'n, 267 S.C. 536, 230 S.E.2d 219 (1976). Specifically, Regulation 117-190 was promulgated to clarify the meaning of the phrase "single place or premises" as set forth in § 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.

27 S.C. Code Ann. Regs. 117-190 (Supp. 1996) (emphasis added).

8. The first issue before this tribunal is whether any person, that is Collins Entertainment Corp. or Vito Finizio, 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 27 S.C. Code Ann. Regs. 117-190(Supp. 1996).

9. 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 Assocs., 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. South Carolina Pub. Serv. 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 Serv., Inc. v. South Carolina 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, not just the licensees, 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 or a business entity as well as a licensee or machine owner. See Black's Law Dictionary 1142 (6th ed. 1995). Further, § 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. Hence, § 12-21-2804(A) (Supp. 1996) mandates revocation of the licenses so used, even if licensee, Collins Entertainment Corp., was not directly involved in applying for, receiving, maintaining, or permitting its licenses to be used by Vito Finizio in contravention of the statute. Such an interpretation is consistent with the plain language of the statute.

10. The facts of this case clearly indicate that five operational Class III video game machines each were located in Treasure Island II, III, and IV on December 12, 1996. The evidence further indicates that all rooms were open for business at the time of inspection and no employee was present on the premises of these businesses.

11. The owner or operator of the businesses, Vito Finizio, 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. However, the Department did not present sufficient evidence to establish that Collins Entertainment Corp. 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 27 S.C. Code Ann. Regs. 117-190 (Supp. 1996).

12. 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 § 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 § 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 South Carolina Dep't of Revenue and Taxation v. 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. South Carolina 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). The Respondent Vito Finizio has failed to meet the "one separate employee" requirement set forth in Regulation 117-190 with regard to the aforementioned businesses. Failing to satisfy one requirement of the regulation 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). Consequently, the fifteen Class III video game machine licenses located at Treasure Island II, III, and IV on December 12, 1996, are subject to revocation.

D. Penalty

13. 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.

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

15. 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 meaning of this language is to preclude an establishment which has had a license revoked from utilizing new licenses for a six month period. Hence, the practical effect would be preclusion of operation at such an establishment. 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 operations for six months. See Singletary v. South Carolina 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).

16. 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 Collins Entertainment Corp., the licensee of the machines in question. However, the Department has not established that Collins Entertainment Corp. 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. See Stacks v. South Carolina Dep't of Revenue and Taxation, 95-CP-40-0239 at 8-9 (C.P. Richland County April 20, 1995).

Under § 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. However, a monetary fine under § 12-21-2804(F) may only be imposed on the person directly involved in the violation of § 12-21-2804(A). In this case, the Department only presented sufficient evidence to establish that the operator of the location, Vito Finizio, was directly involved in violating the Act. The Department did not present sufficient evidence to warrant the imposition of a fine against Respondent Collins Entertainment Corp. pursuant to S.C. Code Ann. § 12-21-2804(F) (Supp. 1996). When applying for a license, a licensee violates the statute if he applies for a license to be used in the operation of more than five machines at a single place or premises. The statute does not state, as the Department would like this tribunal to construe it, that a person who applies for a license which is subsequently used for the operation of more than five machines at a single place or premises is in violation of the statute. In the instant case, as the licensee did not violate the statute at the time of application, or have direct involvement in the maintenance or operation of the businesses, the alleged violation has not been established.

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 fifteen (15) video game machine licenses referenced herein, owned by Collins Entertainment Corp., located at Treasure Island II, III, and IV, 773 Main Street, North Myrtle Beach, South Carolina, on December 12, 1996.

IT IS FURTHER ORDERED that no video game machine licenses shall be utilized at these businesses for a period of six months from the date of revocation of the licenses.

IT IS FURTHER ORDERED that the Department shall impose a fine of $5,000 against Respondent Vito Finizio.

IT IS FURTHER ORDERED that the imposition of a $5,000 fine against the Respondent Collins Entertainment Corp. must fail.

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

November 19, 1997

Columbia, South Carolina

1. Regulation 117-190 has been held to be "valid and enforceable and a valid exercise of the power of the . . . Department." McNickel's, Inc. v. South Carolina Dep't of Revenue, 96-CP-07-1072 (C.P. Beaufort County June 6, 1997); See also AAA Entertainment Corp. v. South Carolina Dep't of Revenue, 96-CP-07-1595 (C.P. Beaufort County June 6, 1997); Scurry v. South Carolina Dep't of Revenue, 97-CP-07-0408 (C.P. Beaufort County June 6, 1997). The one 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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