SC Administrative Law Court Decisions

This matter comes before me upon request for a Hearing by the Respondents after being cited for violating S.C. Code Ann. § 12-21-2804(A)(Supp. 1996). The South Carolina Department of Revenue ("Department") contends that the Respondents operated more than five (5) video poker machines in a "single place or premises." A Hearing was held before the Administrative Law Judge Division on November 25, 1997.

Having observed the witnesses and exhibits presented at the hearing and closely passed upon their credibility, taking into consideration the burden of persuasion by the Parties, I make the following Findings of Fact by a preponderance of evidence:

1. Legal notice of the time, date, place and subject matter of the Hearing was given to the Petitioner and the Respondents.

2. The Department's agents conducted an inspection at the Little Las Vegas Convenience Store located at 577 Bettis Academy Road Suite 3, Trenton, South Carolina on February 19, 1997. The game rooms located in Little Las Vegas were operated by Andrew D. Williams. After the inspection, the Department issued a violation report against the Respondents charging them with operating Joker's Wild in violation of S.C. Code Regs. § 117-190 (Supp. 1996) by not having "at least one separate employee on the premises during business hours."

3. The Respondents' location was a convenience store which contained four video game rooms-- Joker's Wild, Four Aces, Lady Luck and Royal Flush. The game rooms in Joker's Wild and Four Aces were open and the machines in these rooms were on and operational. Joker's Wild and Four Aces contained five (5) Class III video game machines each. Lady Luck and Royal Flush contained no machines.

4. When the SLED officers entered the location there were three employees on the location's premises. The manager was in a back office taking a nap. Susan Williams, the store's cashier, was located at the cash register in the convenience store of the location. Wesley Widner was standing in Four Aces.

5. The Respondents contend that though Ms. Williams was located at the cash register in the convenience store, she was the employee responsible for Four Aces. Additionally, although Wesley Widner was in Four Aces, he was responsible for Joker's Wild.

6. Scott Brantley, an employee of Brantley Amusement, contends that he previously visited the location during an inspection in October 1996 and that the location was not cited for failure to have "at least one separate employee on the premises during business hours" because the cashier was acting as an employee of one of the game rooms. Furthermore, Andrew D. Williams contends that both he and his employees have been previously advised by both Department employees and Special Agent Causey that the cashier could act as an employee of a game room while working as a cashier. I find that Agent Causey did not advise the Respondents that the cashier could act as an employee of a game room and that Mr. Brantley and Mr. Williams incorrectly came to that assumption. Furthermore, the evidence does not establish that any of the above individuals were authorized to speak on behalf of the Department concerning the interpretation of "single place or premises."

7. Joker's Wild had a retail sales tax license issued to Andrew D. Williams. The Class III machine licenses were all purchased by Brantley Amusements Co. The following Class III video game machine licenses were located in Joker's Wild:

Joker's Wild

025071

025072

025073

025075

025088

8. I find the Respondents were in violation of the Video Game Machines Act for failing to have at least one separate employee in the game room premises during business hours.

9. The Department seeks the imposition of a Five Thousand ($5,000.00) Dollar fine against each of the Respondents, revocation of the machine permits located in Joker's Wild and the restriction that no permit be issued for the Respondents' location for six months. There was no showing by the Department that Andrew D. Williams has previously violated the Video Game Machines Act. I therefore find that the appropriate penalty in this case is a Two Thousand ($2,000.00) Dollar fine against Andrew D. Williams.

The evidence shows that Scott Brantley knew that Little Las Vegas was utilizing the cashier as an employee of a game room. Furthermore, Brantley Amusements was previously charged with operating Class III machines in a single place or premises without an employee present during business hours on June 16, 1996. In settlement of that charge, Brantley Amusements agreed to surrender the nine Class III licenses at the charged location. See South Carolina Department of Revenue v. Brantley Amusements, et al., Docket No. 96-ALJ-17-0544-CC (1997). Therefore, I find that the appropriate penalty in this case is a Three Thousand Five Hundred ($3,500.00) Dollar fine against William W. Brantley and revocation of the machine licenses in Joker's Wild.

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

1. The Administrative Law Judge Division has jurisdiction to hear this matter pursuant to S.C. Code Ann. § 12-4-30 (D) (Supp. 1996) and S.C. Code Ann. § 1-23-320 (Supp. 1996).

2. The Department contends that the Respondents violated S.C. Code Ann. § 12-21-2804(A)(Supp. 1996). That section provides:

After July 1, 1994, the commission [Department] may not issue nor authorize to be maintained any licenses or permits for more than five machines authorized under Section 12-21-2720(A)(3) at a single place or premises.

3. Machines licensed under Section 12-21-2720(A)(3) include video games with a 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. S.C. Code Ann. § 12-21-2804(A) (Supp.1996) states that the penalty for failing to comply with the maximum number of machines in a "single place or premises" is the revocation of the licenses of machines located in the establishment.

5. S.C. Code Ann. § 12-21-2804(F) (Supp. 1996) states that a person who violates Section 12-21-2804(A) may be fined up to Five Thousand ($5,000.00) Dollars.

6. The Video Game Machines Act ("Act") does not define the term "single place or premises."

7. The Honorable G. Ross Anderson held that the term "single place or premises" is "sufficiently defined and susceptible of a common and ordinary meaning to provide a person of ordinary intelligence a reasonable notice of the prescribed conduct." Reyelt, et al. v. South Carolina Tax Commission, CA No. 6: 93-1491-3 (D.S.C. July 5, 1994). On June 23, 1995, S.C. Code Regs. 117-190 (Supp. 1996) became effective. It provides as follows:

The Video Game Machines Act, found in Article 20, Chapter 21 of Title 12, limits the number of machines that may be located in a "single place" or "premises."

A single place or premises must be a fixed location. It does not include moving property such as a boat or a train, unless such property is permanently affixed to a specific location.

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 have at least one 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 premises" for purposes of The Video Game Machines Act.

8. Regulation 117-190 requires that each business must have a separate employee on the premises while the business is open. 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 Indem. Co. v. Lindsay, 273 S.C. 79, 254 S.E.2d 301, 304 (S.C. 1979). Thus, the phrase "on the premise" presumptively must have meaning. 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. I find that the Respondent's video poker businesses did not have an employee specifically assigned to Joker's Wild.

9. In South Carolina Coastal Council v. Vogel, 292 S.C. 449, 357 S.E. 2d 187 (1987), the Court held that:

The doctrine of estoppel will not be applied to deprive the State of the due exercise of its police power or to thwart its application of public policy. South Carolina Department of Social Services v. Parker, 275 S.C. 176, 268 S.E.2d 282 (1980). This does not mean that estoppel automatically cannot apply against a government agency. A governmental body is not immune from the application of the doctrine of estoppel where its officers or agents act within the proper scope of their authority. Oswald v. Aiken County, 281 S.C. 298, 315 S.E.2d 146 (Ct.App.1984). The public cannot be estopped, however, by the unauthorized or erroneous conduct or statements of its officers or agents which have been relied on by a third party to his detriment. Farrow v. City Council of Charleston, 169 S.C. 373, 168 S.E. 852 (1933); Patterson v. Goldsmith, 288 S.C. 551, 343 S.E.2d 661 (Ct.App.1986).

10. 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 Investments, 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, a 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, 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 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). With the advent of restructuring and the abolition of the Tax Commission, however, the Administrative Law Judge Division was given the authority to hear "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). The Administrative Law Judge, as the current fact-finder, must also impose a 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 and the tribunal responsible for conducting the contested case proceedings has the authority to decide the issues based on the facts presented, and make the final decisions on all the issues, including the appropriate penalty.

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

ORDERED that the licenses listed in Findings of Fact paragraph seven are revoked, and a fine of Two Thousand ($2,000.00) Dollars is imposed upon Andrew D. Williams d/b/a Joker's Wild. Furthermore, a Three Thousand Five Hundred ($3,500.00) Dollar fine is imposed upon William W. Brantley d/b/a Brantley Amusements.

IT IS FURTHER ORDERED that no permits shall be issued for any Class III machine to be operated in any of the above game rooms for a period of six (6) months from the date of this Final Decision.

Columbia, South Carolina

December 15, 1997