South Carolina              
Administrative Law Court
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SC Administrative Law Court Decisions

CAPTION:
SCDOR vs. Julian F. Adams, d/b/a Lucky Seven Art Gallery, et al

AGENCY:
South Carolina Department of Revenue

PARTIES:
Petitioners:
South Carolina Department of Revenue

Respondents:
Julian F. Adams, d/b/a Lucky Seven Art Gallery, Carlos E. Amarillo Partnership, d/b/a Cutting Image A, Seven Amusements, Inc., d/b/a Mardi Gras, Collins Entertainment Corp., Brian Nesbitt, d/b/a Brian Nesbitt, Co.
 
DOCKET NUMBER:
97-ALJ-17-0522-CC

APPEARANCES:
Carol I. McMahan, Attorney for Petitioner

James Harrison, Attorney for Respondent
 

ORDERS:

FINAL ORDER AND DECISION

This matter comes before me upon Respondents' request for a contested case hearing after being cited by the South Carolina Department of Revenue (hereinafter referred to as "DOR") for alleged 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 Respondents failed to have "at least one separate employee on the premises during business hours" in two video game rooms at 1699 Highway 17 North, North Myrtle Beach, South Carolina. DOR contends that the game rooms were each open and operational without an employee present as required by law. Respondents challenge the validity of R. 117-190 and dispute DOR's interpretation of the statute and regulation.

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

December 16, 1997. Based upon the relevant and probative evidence presented at the hearing and the applicable law, I find Respondents violated R. 117-190 and S.C. Code

§ 12-21-2804. Accordingly, the ten Class III machine licenses in the subject rooms are hereby revoked. No Class III machines shall be operated in the respective game rooms for a period of

six (6) months. Respondents, Julian Adams, and Sevens Amusements, Inc., are each fined Five Thousand Dollars ($5,000).

DISCUSSION

The material facts are not in controversy in this case. Respondents admit that no employees were in either of the two subject game rooms at the time of the inspection of the premises, but argue that an employee need not remain within the physical four walls of a game room at all times to be in compliance with the law. Respondents claim that to require an employee to be physically present in a game room is an overbroad and expanded interpretation of R. 117-190. Rather, Respondents, citing dicta in South Carolina Department of Revenue v. Great Games, Inc., Docket No. 96-ALJ-17-0204-CC (January 22, 1997), submit that if an employee located outside of the game room, but in close enough proximity to serve the needs of the customers in that game room, the employee meets the "at least one separate employee on the premises during business hours" legal requirement.

I have consistently applied a bright line test in "single place or premises" cases in which the issue is the presence of an employee. The language of the regulation imposes a requirement of having a "separate employee on the premises." The language is not ambiguous and must be taken in its literal and ordinary meaning. Lail v. Richland Wrecking Company, Inc., 280 S.C. 532, 313 S.E.2d 342 (Ct. App. 1984). To employ the rules of statutory construction to find that "on the premises" allows an employee to be "away from the premises" violates the principle that the rules of statutory construction are provided to remove doubt, never to create doubt. See 73 Am. Jur. 2d Statutes § 146, citing Englewood Water Dist. v. Tate, 334 So.2d 626 (Fla. App. 1976).

Section 12-21-2804(A) prohibits the operation of more than five Class III video game machines at a single place or premises. DOR promulgated R. 117-190 to clarify the statutory requirements of § 12-21-2804(A) and to assist in its implementation. Regulation 117-190 merely sets forth a four-prong test to determine whether a particular business location is a "single place or premises" and provides that for a location to be considered a "single place or premise" for purposes of the Video Game Machines Act, it must have: (1) a separate electric utility meter; (2) at least one separate employee on the premises during business hours; (3) a separate local business license where required; and (4) a separate State sales tax license.

In this case, where at least two interior structures exist with machines inside those structures, each interior structure is a "video game area" under R. 117-190. A video game room fails to be a "single place or premises" at which Class III machines may be legally operated if the room does not have an employee physically within the four walls of the game room. An employee cannot be on the premises of an identified space if the employee is physically elsewhere. Accordingly, once the employee physically leaves the space of the video game area, the employee is no longer "on the premises."

A court must not seek ways to rewrite statutes or regulations. To depart from the plainly expressed meaning causes the tribunal to legislate rather than interpret since Athe wisdom of legislation rests with the Legislature, and it is the province of the Courts to construe, not to make, the laws . . . @ Creech v. South Carolina Pub. Serv. Auth., 200 S.C. 127, 146, 20 S.E.2d 645, 652 (1942). In short, an ALJ cannot add conditions to the "on the premises" language of the regulation trying to provide exceptions that seek to improve upon what the General Assembly has plainly promulgated. 27 S.C. Code Ann. Regs. 117-190 (Supp. 1996) is a valid regulation that neither expands nor adds to the statute.

The purpose of the regulation is to provide a high degree of certainty to defining a separate place or premises. The very reason for the promulgation is that no statutory definition was provided. In accordance with the purpose sought, the regulation adopts site specific criteria. Indeed, the regulation counts walls, limits openings in the walls, prevents access from one area to another, and even details the type of walls that can be used. Given the regulations's site specific analysis, the most consistent view is that the plain language of "on the premises" limits the employee to the physical space of the four walls. On the contrary, inconsistency with the regulation results if "on the premises" requires examining whether the employee's line of sight covers more than one area or whether the reason the employee is away is a proper reason. In short, the regulation is site specific and requires that "on the premises" be within the four walls of the area under review.



FINDINGS OF FACT

By a preponderance of the evidence I make the following Findings of Fact:

On January 21, 1997, a video gaming business known as "Mardi Gras" operated at 1699 Highway 17 North, North Myrtle Beach, South Carolina, in a mall-type structure containing six video gaming rooms and a common area.

SLED agent Pam Williamson entered the subject location at 1699 Highway 17 North and conducted an inspection of the premises.

Agent Williamson's inspection included examining each of the open game rooms, playing video games in several of the game rooms, taking photographs of the location, examining the wall construction, utility meters, business and sales tax licenses for the game rooms, listing the owner information and license numbers for each of the machines in the game rooms, drawing a diagram of the location's floor plan, and determining the number and location of any employees for the open game rooms.

Upon inspection, four of the six video game rooms were open for business with machines operational and available for play.

Of the four open game rooms, two game rooms, Mardi Gras and Lucky Seven Art Gallery, were without an employee within the rooms during the inspection.

Agent Williamson played the video games located in game rooms Mardi Gras and Lucky Seven Art Gallery.

No employee was present in either room during while Agent Williamson played the video games.

The following Class III video game machine licenses were affixed to Class III video game machines located in the room at the subject location known as Mardi Gras (identified as game room #2 on Petitioner's Exhibit #4): 3810736, 3810735, 3810734, 3810733, 3810732.

The following Class III video game machine licenses were affixed to Class III video game machines located in the room at the subject location known as Lucky Seven Art



Gallery Gras (identified as game room #3 on Petitioner's Exhibit # 4): 3810731, 3810730, 3810729, 3810728, 035209.

Collins Amusements Corp. owns nine of the machines in Mardi Gras and Lucky Sevens Art Gallery and is the licensee for each of those nine machines.

Brian Nesbitt owns one of the machines located in Lucky Sevens Art Gallery and is the licensee for that machine.

Julian Adams holds the retail license for the game room Lucky Sevens Art Gallery (#026-37559-2).

Sevens Amusements Co. holds the retail license for the game room Mardi Gras (#026-40935-1).

Neither Collins Amusements Corp. nor Brian Nesbitt exercised any control or management of the subject game rooms or their employees operated by the retailers.

Prior to leaving the location upon the conclusion of her inspection, Agent Williamson issued and left with an employee at the location a Preliminary Findings Report For Video Gaming in which citations for alleged violations of the single place or premises requirement of R. 117-190 and § 12-21-2804(4).

CONCLUSIONS OF LAW

Based upon the Findings of Fact, I conclude as a matter of law the following:

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. (1986 & 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).

  1. 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 (D.S.C., Nov. 15, 1993); see also 1994 Op. S.C. Att'y Gen. 21.


  1. 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.
  2. 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. 27 S.C. Code Ann. Regs. 117-190 (Supp. 1996) is a valid regulation which is not overbroad in scope of application.
  2. If a statute's language is plain and unambiguous, and conveys a clear and definite meaning, there is no occasion for employing rules of statutory interpretation and the court has no right to look for or impose another meaning. Paschal v. State Election Comm'n, 454 S.E.2d 890, 317 S.C. 434 (1995); see Miller v. Doe, 312 S.C. 444, 441 S.E.2d 319 (1994).
  3. Where the terms of the statute are clear, the court must apply those terms according to their literal meaning. Paschal v. State Election Comm'n, 454 S.E.2d 890, 317 S.C. 434 (1995); see Adkins v. Varn, 312 S.C. 188, 439 S.E.2d 822 (1993).
  4. A court cannot construe a statute without regard to its plain and ordinary meaning, and may not resort to subtle or forced construction in an attempt to limit or expand a statute's scope. Paschal v. State Election Comm'n, 454 S.E.2d 890, 317 S.C. 434 (1995); see Berkebile v. Outen, 311 S.C. 50, 426 S.E.2d 760 (1993).


  1. Respondents Julian Adams and Sevens Amusements, Inc. failed to have "one separate employee" within each of the two subject rooms, as defined in R. 117-190.
  2. Respondents Julian Adams and Sevens Amusements, Inc. violated S.C. Code Ann. § 12-21-2804 by operating Class III 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 Class III video poker machine must be revoked by virtue of its misuse under the Act, regardless if the actual violator is the retail operator, machine owner, or licensee.
  4. 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.
  5. Section 12-21-2804(F) provides that only those persons directly involved in the management or operation of a location in violation of § 12-21-2804(A) are subject to monetary fines.
  6. Within statutory limits, the amount of a fine is a matter of trial-court discretion. State v. Sheppard, 54 S.C. 178, 32 S.E. 146 (1899). An administrative law judge, as fact finder, has the prerogative "to impose an appropriate penalty based on the facts presented." Walker v. South Carolina ABC Comm'n, 305 S.C. 209, 211, 407 S.E.2d 633, 634 (1991).
  7. 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).
  8. The trial judge is in the best position to weigh witnesses' demeanor and veracity and to evaluate their testimony. See 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); 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).
  9. Because Collins Entertainment Corp. and Brian Nesbitt were merely the licensees of the machines in question and exercised no control or management of the subject game rooms or their employees operated by the retailers, they 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).
  10. A fine of $5,000 imposed upon each of the retail operators in violation is reasonable under the circumstances of this case.
  11. Section 12-21-2804(A) also 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."


ORDER

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

ORDERED, that the ten game machine licenses in subject rooms Mardi Gras (3810736, 3810735, 3810734, 3810733, 3810732) and Lucky Sevens Art Gallery (3810731, 3810730, 3810729, 3810728, 035209) are revoked.

IT IS FURTHER ORDERED that no Class III machines shall be operated in the two subject rooms at the location at 1699 Highway 17 North, North Myrtle Beach, South Carolina, for a period of six (6) months from the date of revocation of the licenses.

IT IS FURTHER ORDERED that Respondents Julian Adams and Sevens Amusements, Inc. shall pay a monetary fine to the Department of Revenue in the amount of Five Thousand Dollars ($5,000) each for violation of the "single place or premises" statute and regulation.

AND IT IS SO ORDERED.

__________________________________

STEPHEN P. BATES

ADMINISTRATIVE LAW JUDGE

April 7, 1998

Columbia, South Carolina


Brown Bldg.

 

 

 

 

 

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