ORDERS:
FINAL DECISION
STATEMENT OF CASE
This matter comes before me upon Respondents' request for a hearing after being cited for
violating the Video Game Machines Act, specifically, S.C. Code Ann. § 12-21-2804 (A)(Supp.
1997). The South Carolina Department of Revenue (Department) contends that Respondents
operated machines licensed pursuant to S.C. Code Ann. Section 12-21-2720(A)(3) (Supp. 1997)
(commonly referred to as "Class III" machines and licenses) in violation of Section 12-21-2804(A).
A hearing was held before the Administrative Law Judge Division on March 17, 1998.
FINDINGS OF FACT
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. Notice of the time, date, place and subject matter of the Hearing was given to the
Department and the Respondents.
2. The Department issued a violation report against Respondents on October 8, 1997,
for operating Class III machines in an establishment under suspension. Previously, on September 24,
1997, Administrative Law Judge Bates determined that Respondents had violated the single place
or premises requirement of Section 12-21-2804(A) on June 13, 1996. South Carolina Department
of Revenue v. Richard McComas, et al., 97-ALJ-17-0165-CC ("Decision"). In his Decision, Judge
Bates ordered revocation of the Class III licenses at the location, monetary fines, and that no
machines could be licensed at that location for a period of six months from the date of revocation.
3. The Department issued a Final Determination for this violation, revoking the twenty
Class III licenses in the establishment on October 8, 1997, suspending licensing at the location for
a period of six months, and imposing monetary fines in the amount of $100,000.00 and $20,000.00
against Respondents Richard McComas and Golden Image Enterprises, Inc., respectively.
Respondents timely appealed this determination.
4. Mr. McComas is the successor in interest to Golden Image Enterprises, Inc.
5. On October 8, 1997, SLED agent Pamela Williamson entered the video gaming
location at 2761 Hwy. 17 South, Garden City, South Carolina. Agent Williamson found three rooms
in operation. A fourth room also contained five Class III machines that were plugged in and
operational. However, the doors to that room were closed. The attendant on duty told Agent
Williamson that if she wished to play in that room, the attendant would open it for her. Respondents
contend that if room four had been open, that a corresponding room would have been closed.
However, the attendant's comments show that the Respondents maintained machine and Class III
licenses that were available for play in the fourth room. I therefore find that each of these rooms
contained five Class III video poker machines that were available for operation.
6. Department records and the owner/identification on each of the Class III machines
indicated the owner/operator/licensee was Richard McComas. Mr. McComas further testified that
he owned each Class III machine and license and had placed each machine and license in the four
rooms for operation. The Class III license numbers and their specific location are set forth below:
Machine License Number Location
3806105 Golden Image, Lic. #026443938
3806104 "
3806103 "
3806101 "
3806108 "
3806115 Golden Image 2, Lic. #026443947
3806107 "
3806113 "
3806111 "
3806112 "
3806110 Golden Image 3, Lic. #026443965
3806114 "
3806106 "
3806117 "
3806065 "
3929721 Golden Image 4, Lic. # 026443974
3806102 "
3806118 "
3806116 "
3806109 "
7. Petitioner's Exhibit No.3, "Diagram of Location Suspended," when compared with
Petitioner's Exhibit No. 4 "Diagram of Location on October 8, 1997," clearly show the location
suspended in Judge Bates' September 27, 1997 Decision, is the exact same location wherein video
poker machines were operating on October 8, 1997. Furthermore, Agent Williamson spoke with Mrs.
McComas, wife of Richard McComas, who managed the location. Agent Williamson showed Mrs.
McComas the Decision of Judge Bates which had revoked licenses and prohibited operation of Class
III machines at this location for a period of six months. Mrs. McComas stated she knew of the
Decision.
8. The evidence established the following sequence and timing of events:
June 13, 1996 Initial Single Place or Premise Violation
September 24, 1997 Judge Bates' Decision Revoking Twenty-five
Licenses and Suspending Video Poker Operations
for Six Months
September 27, 1997 Respondents Receive Notice of Judge Bates'
Decision
October 8, 1997 Respondents are issued a Preliminary Citation for Operating Under Suspension
October 17, 1997 Respondents File an Appeal and Motion for Stay of Judge Bates' Decision in Horry County
October 27, 1997 Respondents Post Bond Pursuant to S.C. Code
Ann. Section 12-60-3370 (Supp. 1997) for Appeal
of Judge Bates' Decision
March 17, 1998 Respondents Continue to Operate the Video Poker Location at 2761 Highway 17 South, Garden City, South Carolina
9. Respondents' witness, Richard McComas, testified that his video poker business
located at 2761 Hwy. 17 South, Garden City, South Carolina, had been operating consistently since
receiving Judge Bates' Decision on September 27, 1997. Mr. McComas stated he knew of the
Decision suspending his licenses and prohibiting video poker operations on the premises. However,
Mr. McComas testified he thought he could continue to operate while the Decision was under appeal.
10. I find that on October 8, 1997, Respondents maintained for operation, Class III
machines and licenses in video gaming rooms, Golden Image, Golden Image 2, Golden Image 3 and
Golden Image 4 while the location was under suspension from operating.
ISSUES PRESENTED
The Department advances that Respondents operated and maintained Class III video poker
machines in a location under a six-month suspension in violation of Section 12-21-2804(A). The
Department asserts this is a separate and distinct violation as set forth in Section 12-21-2804(A),
requiring revocation of Class III licenses, suspension of licensing, and monetary penalties.
Respondents argue that Judge Bates' Decision was stayed due to their appeal of the matter
to Circuit Court and as such, they have not committed a violation. Similarly, they argue the penalties
are excessive.
CONCLUSIONS OF LAW
Based upon the above Findings of Fact, I conclude as a matter of law, the following:
General Conclusions
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. Respondents violated Section 12-21-2804(A) by operating in a location under a six-month suspension of licensing for video poker.
3. Section 12-21-2804(A) mandates that the Commission (Department) "shall revoke
the licenses in an establishment which fails to meet the requirements of this section." This Section
also mandates that the Department must not issue a license for a machine in an establishment in
which a license has been revoked for a period of six months. The authority to issue a license is the
power to revoke it. Feldman v. South Carolina Tax Commission, et al, 26 S.E.2d 22 (1943).
4. Section 12-21-2804(F) states that a person who violates Section 12-21-2804(A) may
be fined up to five thousand dollars.
5. The Department contends that operating in a location under a six-month suspension
of licensing is a violation of Section 12-21-2804(A). Respondents argue this is not correct. I find
continued operation of video poker in a location prohibited from such business is a violation of the
Video Game Machines Act, Section 12-21-2804(A).
The role of the court in statutory interpretation is limited to seeking to effectuate the
legislature's intent. Laird v. Nationwide Ins. Co., 243 S.C. 388, 395 S.E.2d 206 (1964). In statutory
interpretation, courts must read the statute in a manner that harmonizes it with its subject matter and
is in accordance with its general purpose. Multi-Cinema, Ltd. v. South Carolina Tax Comm'n, 292
S.C. 411, 357 S.E.2d 6 (1987). Plain and unambiguous language in a statute that conveys a clear and
definite meaning should not be altered or redefined by the judiciary. Paschal v. State Election
Comm'n, 317 S.C. 434, 454 S.E.2d 890 (1995). However, if a statute is ambiguous, courts must
ascertain legislative intent through statutory construction. See Abell v. Bell, 229 S.C. 1, 91 S.E.2d
548 (1956). An ambiguity arises when the language of a statute is capable of being understood by
reasonably well-informed persons in either of two or more senses. Southeastern Fire Ins. Co. v.
South Carolina Tax Comm'n, 253 S.C. 407, 171 S.E.2d 355 (1969).
The Video Game Machines Act ("Act") became effective on July 1, 1993. This Act provides
the framework for the licensing and operation of various video game machines and locations in the
State of South Carolina. The Act is directed at the regulation of the ever growing gambling industry
in the State of South Carolina. Justice v. The Pantry, et al., Opinion No. 2787 (S.C. January 26,
1998).
Section 12-21-2804(A) of the Act, provides in relevant part that:
(A) . . . The commission shall revoke the licenses of machines located
in an establishment which fails to meet the requirements of this
section. 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 the revocation . . . (emphasis added).
This language has produced two reasonable, but varying interpretations. One interpretation,
commonly referred to as the "dead location" approach, holds that once a license has been revoked
for a machine within an establishment, no Class III machines may be maintained at that location for
six months from the date of revocation. The alternative interpretation, the "dead machine" approach,
maintains that no license should be reissued on specific machines for six months after a Class III
license has been revoked on those machines.
These differing interpretations result from the legislature's usage of the phrase "a machine"
in the six month penalty provision. As an indefinite article, "a" may refer to a specific object or
thing. See Black's Law Dictionary 1 (6th ed. 1990). However, the article is "often used in the sense
of 'any' and is then applied to more than one individual object." Id. Therefore, interpreting this
statute in a manner that harmonizes it with its subject matter and is in accordance with its general
purpose, the relevant portion of Section 12-21-2804(A) is best read to state that "[n]o license may
be issued for [any] machine in an establishment in which a license has been revoked."
Furthermore, the dead machine approach should not be adopted because doing so would
make Section 12-21-2804(A) internally inconsistent. Courts reject a construction of words used in
a statute when acceptance of a statutory interpretation would lead to a result so absurd that it could
not possibly have been intended by the legislature or would defeat the plain legislative intention.
Kiriakides v. United Artists Communications, Inc., 312 S.C. 271, 440 S.E.2d 364 (1994) (citing
Stackhouse v. Rowland, 86 S.C. 419, 68 S.E. 561 (1910) (courts will reject the plain and ordinary
meaning of words used in a statute when to accept it would lead to a result so absurd that it could
not possibly have been intended by the legislature or would defeat the plain legislative intention)).
The clear language of Section 12-21-2804(A) grants the Department the authority to revoke any
licenses at an establishment found in violation of the requirements of the statute.
The Department, however, does not issue video game machine licenses for specific locations.
Instead, licenses are issued to individuals for machine ownership. Therefore, meaningful punishment
of the licensee for failure to comply with the statute is best effectuated through revocation of the
machine licenses. Under Section 12-21-2804(A), a machine license must be revoked by virtue of
its misuse at a particular establishment, whether the actual violator is the licensee, machine owner,
or lessee. Although machine owners may seek relicensure of the machines, they incur significant
costs in so doing. First of all, the machine owner must pay the fee for licensure in accordance with
S.C. Code Ann. § 12-21-2728(A). Secondly, the owner must find another location for machine
placement and develop a clientele without advertising the machine's existence at the new location.(1)
The statute also curtails violations of the Act by requiring that the place where the violation
occurred cease operations for six months. The Legislature probably envisioned that licenses would
be issued for video poker machines at specific establishments. However, the practical effect of the
dead machine approach as the Department currently licenses video poker activity would be to exact
an additional penalty for violation of the Act upon the machine owner alone, although the owner
may not have been the actual violator. Punishment against the operators of the establishment would
be virtually meaningless. Owners of establishments would be able to buy or lease new machines,
purchase new licenses and resume operations at the same location (benefitting from the same
patrons) almost immediately, having only suffered replacement costs and usage losses for the
affected machines during the revocation period. The operators of the establishments who potentially
may possess greater culpability could escape any punishment pursuant to the dead machine approach.
The legislature surely did not intend such an absurd result.
Additionally, it would be impossible, as a practical matter, for the Department to enforce the
penalty provision of Section 12-21-2804(A) under the "dead machine" approach. The Department
has elected to issue licenses that may be attached to any machine at any location. The "dead
machine" approach would necessitate that the Department track machines that are readily movable
by serial number to make sure that no "dead machine" was being operated at any given location.
Proponents of the dead machine approach argue that the legislature would have provided for
a six month revocation of the "establishment license" if it intended to impose a "location" penalty.
If the Department issued video gaming licenses for specific establishments, application of this
provision would be simple. However, the Department does not issue a specific "establishment
license" other than retail licenses pursuant to Section 12-36-510 (Supp. 1997).(2) Moreover, video
gaming machines are usually placed in establishments that conduct business activities other than
video gaming. Therefore, revocation of a retail license would impose a greater punishment upon an
establishment than intended by the legislature by precluding all retail activities, not just video
gaming. The only practical way to curtail violations of the Act at a given location is to revoke the
licenses of machines in the establishment and refuse to license any machines at that location for a
fixed period of time.
Furthermore, the Department's interpretation of Section 12-21-2804(A) should be given
significant consideration. The construction of a statute by the agency charged within its
administration will be accorded the most respectful consideration and will not be overruled absent
compelling reasons. Captain's Quarters v. S.C. Coastal Council. 306 S.C. 488, 413 S.E.2d 13
(1992). The Department is the agency charged with the administration of the Video Game Machines
Act. The Department has consistently interpreted Section 12-21-2804(A) as imposing a six month
prohibition on the use of any class III machine at an offending location. The Department's
interpretation is reasonable and should be afforded great deference. Because there are no compelling
reasons to deviate from the Department's interpretation, the dead location approach should be
adopted in this case. Therefore, Section 12-21-2804(A) requires that the Department refuse to issue
licenses for any machine to be placed in an establishment where machine licenses have been revoked
for six months.
In this case, Judge Bates ordered the revocation of the Class III licenses at the establishment
at issue. Moreover, Judge Bates ordered that "that no video game machine licenses shall be utilized
in Pennies from Heaven, M&R's Network, R&M Amusement or Power Player for a period of six
(6) months from the date of revocation of the licenses." Subsequent to that Decision, Respondents
continued to operate Class III machines therein. Specifically, Respondents were operating the video
poker location on October 8, 1997 and have stated they will continue to operate in violation of the
language of Judge Bates' Decision. Therefore, Respondents have committed a clear violation of
operating under suspension.
Stay of the September 24, 1997 Order
6. Respondents argue that there is no violation here because various rules permit a stay. The
Department advances there has been no stay of the Decision under any rule. I find that there was no
stay of Judge Bates' Decision suspending video poker operations at the location at issue.
The current matter and the violation found in Judge Bates' Decision are governed by the
Administrative Procedures Act. S.C. Code Ann. Section 1-23-380(A)(2) (Supp. 1997) provides:
The filing of the petition does not itself stay enforcement of the agency decision. The
agency may grant, or the reviewing court may order, a stay upon appropriate terms.
Furthermore, under the authority set forth in the Administrative Procedures Act, S.C. Code Ann.
Section 1-23-650 (Supp. 1997), the Administrative Law Judge Division has adopted procedural
rules. Specifically, Rules 29© and (D), ALJD, provide that the Division may stay the effect of its
order within the terms of the order, or on motion of any party. Additionally, ALJD Rule 29(C)
provides that a Motion for Reconsideration does not, of itself, stay the Division's decision.
Here, the violation for operating under suspension was issued on October 8, 1997. To the
date of the hearing on this matter, March 17, 1998, there was no Circuit Court or Division order
granting a stay of the Division's Decision of September 24, 1997. In fact, Respondents did not
request that the Division issue a stay of its order. Similarly, although Respondents filed a Motion
for Stay in Horry County Circuit Court on October 21, 1997, Respondents admit the motion has
never been heard or granted. Because the Administrative Procedures Act specifically provides that
a stay of the Division's order is not automatic and, to date, Respondents have not been granted a stay
of the Decision, the Department's issuance of a violation for operating under suspension was
appropriate.
Respondents further argue Rule 62, SCRCP, prohibits the Department's issuance of the
violation at issue. Such is not the case. Rule 62 (d), SCRCP provides "[w]hen an appeal is taken,
a party, by giving a supersedeas bond, may obtain a stay subject to the exceptions contained in
subdivision (a) of this rule and the South Carolina Appellate Court Rules. The bond may be given
at or after the time of filing the notice of appeal or of procuring the order allowing the supersedeas
as the case may be. The stay is effective when the supersedeas bond is approved by the court."
However, SCRCP Rule 62 is not applicable to Administrative Law Judge Decisions, which are
administrative decisions, effective upon issuance. Also, ALJD Rule 52 sets forth that "[t]he South
Carolina Rules of Civil Procedure may, where practicable, be applied in proceedings before the
Division to resolve questions not addressed by these rules." In this case there is no need to apply
the South Carolina Rules of Civil Procedure since there are specific provisions in the ALJD Rules
and the Administrative Procedures Act governing the granting of a stay.
Additionally, even if this Court were to determine that the ten-day rule in Rule 62, SCRCP,
is applicable, Respondents would still be in violation, since October 8, 1997, is beyond the ten days
set forth within the rule.
Respondents also contend that since they posted bond, they may continue to operate. I find
this argument to be without merit. First, Respondents posted bond for the monetary fines imposed
by Judge Bates' Decision as required by S.C. Code Ann. Section 12-60-3370 (Supp. 1997). This
bond was posted on October 27, 1997, well after October 8, 1997. Similarly, the Petition for Review
was filed October 21, 1998. This Section requires that one must post bond or pay the amount
ordered by the Administrative Law Judge prior to filing a petition for review in Circuit Court.
Nowhere within this Section is there any reference to a stay of other penalties set forth within the
Administrative Law Judge Decision. A court may not add words to a statute, but may only apply the
language adopted by the Legislature. Banks v. Columbia Ry., Gas & Electric Co., 113 S.C. 99, 101
S.E. 285 (1919).
Penalties
7. The Department seeks the revocation and suspension mandated by statute and a
$5,000.00 monetary penalty for each violation of the suspension. The Department's position is that
Respondent McComas has committed twenty violations, one for each licensed Class III machine in
the location under suspension on October 8, 1997. The Department also seeks a $20,000.00
monetary penalty against Golden Image Enterprises, Inc. ($5,000.00 for each of the four rooms
under suspension that maintained Class III machines). Respondents argue these penalties are too
severe. Section 12-21-2804(A) which provides for five machines at a "single place or premises" also
requires, in part that:
The commission shall revoke the licenses of machines located in an establishment
which fails to meet the requirements of this section. 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 use of the word "shall" rather than "may" establishes the legislative intent to require as
a mandatory penalty, the revocation of the machine licenses at locations that do not meet the
requirements of Section 12-21-2804(A). Similarly, the authority to issue a license is the authority
to revoke that license. Feldman, supra. Here, the Department issued the license for the twenty
machines at issue. As the license is not location specific, when used in an unlawful manner, the
Department is mandated to revoke it pursuant to Section 12-21-2804(A). Therefore, the revocation
of all twenty Class III licenses and a six-month suspension of licensing at the establishment is proper.
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. Section 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.
S.C. Code Ann. Section 12-21-2804(F) (Supp. 1997) provides: "A person violating
subsection (A) . . . of this section is subject to a fine of up to five thousand dollars to be imposed by
the commission." Additionally, as stated above, Section 12-21-2804(A) sets forth 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 the revocation." (Emphasis added). Here, Respondents unlawfully
placed twenty machines in operation at the location. I therefore find that a fine for each machine
unlawfully placed in operation at the location is appropriate.
Furthermore, the Respondent has continued the operation of video poker at his location,
despite Judge Bates' decision prohibiting such operations for a period of six months and despite
notice from agent Williamson. The Respondent has thus disregarded all laws seeking to regulate
him. Despite ample notice he continues to operate his video poker location. Such acts fly in the face
of the very regulatory scheme adopted by the Legislature. Based on such blatant disregard for the
law, I find a $2,500.00 monetary penalty for each machine Respondent McComas placed in the
location in contravention of the law requiring suspension, to be appropriate.
ORDER
Based upon the Findings of Fact and Conclusions of Law, it is hereby:
ORDERED that the licenses listed in Findings of Fact paragraph five are revoked, and a fine
of $50,000.00 is imposed on Richard McComas.
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 (Findings of Fact, paragraph 6) for a period of six
months from the date of this Final Decision.
___________________________
Ralph King Anderson, III
Administrative Law Judge
Columbia, South Carolina
May 29, 1998
1. S.C. Code Ann. § 12-21-2804(B) (Supp. 1997) forbids the advertisement of the availability of video gaming
machines.
2. S.C. Code Ann. § 12-21-2784 (Supp. 1997) provides that "[e]ach machine . . . operator, and licensed
establishment must be licensed by [DOR] pursuant to Article 19 of this chapter and this article before a machine . . .
is placed for public use in this State." S.C. Code Ann. § 12-21-2772(4) (Supp. 1997) defines "'licensed establishment'
as "an establishment owned or managed by a person who is licensed pursuant to Article 19 of this chapter for the
location of coin-operated nonpayout video machines with a free play feature. The Department interprets this section as
simply requiring a sales tax license. Therefore, there is no "establishment license" to revoke. |