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. JJ's of Garden City, Inc., James R. McDonald, Jr., d/b/a McDonald's Amusements

AGENCY:
South Carolina Department of Revenue

PARTIES:
Petitioners:
South Carolina Department of Revenue

Respondents:
JJ's of Garden City, Inc., James R. McDonald, Jr., d/b/a McDonald's Amusements
 
DOCKET NUMBER:
97-ALJ-17-0767-CC

APPEARANCES:
Petitioner, South Carolina Department of Revenue:
Carol I. McMahan, Esq.

Respondents, JJ's of Garden City, Inc. and James R. McDonald, Jr.:
Richard Harpootlian, Esq.

Parties Present: All Parties
 

ORDERS:

ORDER

I. Statement of the Case


The South Carolina Department of Revenue (DOR) seeks fines of $5000 against each respondent, revocation of five Class III machines and a six month prohibition of the use of any Class III machines at the location here under review. JJ's of Garden City, Inc. (JJ's) and James R. McDonald, Jr. (McDonald) oppose DOR's position and assert no fines and no revocation are warranted. JJ's and McDonald's disagreement with DOR's determination places jurisdiction in the Administrative Law Judge Division (ALJD). S.C. Code Ann. §§ 12-60-1310, 12-60-1320, 1-23-600 (Supp. 1997). The hearing in this matter was held March 5, 1998 at the Edgar Brown Building, Columbia, South Carolina.

Based upon the evidence and the argument presented by the parties, the five machine licenses in the game room of Lucky Jimbo's are revoked. JJ's is subject to a $2500 fine, and McDonald is subject to a $1000 fine. The machines in the establishment of Lucky Jimbo's at the time of the violation may not obtain a license for six months from the date of this order, but no prohibition is placed upon the location of Lucky Jimbo's itself.

II. Issues

1. Did JJ's and McDonald violate the single place or premises requirement of § 12-21-2804(A) and S.C. Code Regs. 117-190 by failing to have at least one separate employee on the premises during business hours?

2. If a revocation is imposed, is the location prohibited from using Class III machines for six months or are the machines in the location at the time of the revocation citation prohibited from being licensed for six months from the time of the revocation order?

3. If a violation of § 12-21-2804(A) and S.C. Code Regs. 117-190 occurred, who is liable for a fine and in what amount?

III. Analysis


A. Single Place or Premises


1. Positions of Parties

DOR asserts that JJ's failed to have a separate employee within the four walls of the video game area identified as Lucky Jimbo's during a time when the Class III machines in Lucky Jimbo's were open and available for play by the public. DOR asserts such a failure violates the requirements of Regs. 117-190 and S.C. Code Ann. § 12-21-2804(A) (Supp. 1997). JJ's and McDonald disagree and argue the business was not open and thus no requirement existed for an employee to be present in the game room.

2. Findings of Fact

Based on the preponderance of the evidence, the following findings of fact are entered:

  1. McDonald holds several licenses for Class III video game machines.
  2. McDonald owns Class III video machines that are housed in an establishment containing two video gaming rooms located at 6003 North Kings Highway, Myrtle Beach, South Carolina.
  3. One of the game rooms at the 6003 North Kings Highway location is known as Lucky Jimbo's, and the other game room is known as Jimmagan's Sports Bar.
  4. Each game room contains five Class III video game machines for a total of ten.
  5. JJ's operates the premises known as Lucky Jimbo's and Jimmagan's Sports Bar.
  6. McDonald holds the machine licenses for the five Class III machines used at Lucky Jimbo's and Jimmagan's Sports Bar.
  7. McDonald leases the ten machines to JJ's.
  8. The following machine licenses were affixed to machines located in the game rooms:




Lucky Jimbo's
Jimmagan's Sport's Bar
3929150

3929149

3929148

3929147

3929146
3930006

3930007

3930008

3930009

3930010



  1. On August 5, 1997, a SLED Agent conducted an inspection of the video gaming businesses of Lucky Jimbo's and Jimmagan's Sports Bar.
  2. The inspection began a few minutes after 1:00 p.m.
  3. Upon entering, the Agent announced that she was a SLED Agent and asked an employee near the bar, "Are you open?"
  4. The JJ's employee responded, "We've just opened."
  5. The SLED Agent first inspected the bar area for potential violations of the ABC laws spending approximately five minutes on that task.
  6. Next, she entered the game room of Lucky Jimbo's by means of open doors which led to five Class III machines in a room with lights on and machines operational.
  7. None of the machines in the building were being played.
  8. No patrons were in the game room.
  9. No patrons were anywhere on the premises of the building.
  10. The Agent took down the numbers of licenses on the machines in both rooms and began preparing a report.
  11. By 1:20 p.m. the Agent finished her report, explained it to an employee, obtained the employee's signature on the report, and left the premises.
  12. At no time during the inspection or during the Agent's explanation of the violation did any representative of JJ's assert to the SLED Agent that the machines could not be played or that the game rooms were closed.
  13. An employee of McDonald was already in the building when the SLED Agent entered at a few minutes after 1:00 p.m.
  14. While the Agent conducted the inspection, the McDonald employee was just beginning to remove funds from one of the machines in the game room identified as Jimmagan's Sports Bar.
  15. The McDonald employee had not begun to service any other machine and had not serviced any machine in Lucky Jimbo's.
  16. Neither prior to nor during the inspection did management of JJ's take steps to place an employee in Lucky Jimbo's.
  17. JJ's purports to have a policy of not allowing the play of any machine in a game room when any machine in the building is in the process of having funds removed.
  18. As a result of the inspection, JJ's was alleged to have violated S.C. Code § 12-21-2804(A) and 27 S.C. Code Ann. Regs. 117-190 (Supp. 1997) for operation of more than five machines in a single place or premises.
  19. Copies of the Violation Report were left with JJ's employee on duty.
  20. The Violation Report was the only form left with the employee.
  21. The Violation Report is the size of a normal 8.5" x 11" sheet of paper.
  22. The Violation Report is not blue.


3. Discussion

a. Statutory and Regulatory Requirements for Single Place or Premises

For machines authorized under § 12-21-2720(A)(3), i.e. Class III machines, no person may maintain licenses or permits for more than five Class III machines at a single place or premises. S.C. Code Ann. § 12-21-2804 (Supp. 1997). While the statute does not explain what constitutes a single place or premise, a definition is supplied by Regulation 117-190.

Under the regulation, for an interior structure housing Class III machines, an investigation "must review all the facts and circumstances to determine if each area in reality constitutes a single place or premises for video game machines." While a facts and circumstances review is normally very general, the regulation requires the existence of a minimum four facts. A failure to meet any one of the four facts results in the video game area not being a separate place or premise. Of the four, the one in dispute in this case requires the entity or business to have at least one separate employee on the premises during business hours.

If the Class III video game machines are operational and accessible to customers, an employee is not "on the premises" unless the employee is present in the room identified as the video game area. S.C. Dep't of Revenue and Taxation v. Mickey Stacks, 95-ALJ-17-0742-CC (March 8, 1996), aff'd Court of Common Pleas, Richland County, Civil Action No. 96-CP-40-0889 (March 21, 1997); S.C. Code Ann. Regs. 117-190. An employee is not "on the premises" when the employee is outside the four walls of the video game area even when the employee's physical position enables the employee to observe the room and the employee is performing his job functions at the employee's location. Further, an employee is not "on the premises" even when the employee's absence from the room is for a short period and the absence is for a justifiable reason, e.g., personal physical needs. Rather than allowing exceptions, the language "on the premises" is not ambiguous and must be taken in its literal and ordinary meaning. See Lail v. Richland Wrecking Company, Inc., 280 S.C. 532, 313 S.E.2d 342 (Ct. App. 1984).

b. Facts Of Employee On the Premises

The regulation requires an employee on the premises "during business hours." The question is whether on August 5, 1997, the period between 1:00 and 1:20 p.m. was a period "during business hours" of Lucky Jimbo's. JJ's argues the period was not during business hours since the game room was not open. On the contrary, DOR argues that the business hours had begun at least as late as a few minutes after 1:00 p.m. and thus the game room was open for business at the time of the inspection.

Business hours begin at the moment the location opens for the transacting of its business. See Jolly v. Marion Nat. Bank, 267 S.C. 681, 231 S.E.2d 206, (1976) (a shareholder's access to records during business hours is allowed as long as the access is for those hours of those days during which business could be transacted). However, deciding whether a facility is either open or closed for business requires determining a factual issue based upon the totality of the circumstances for the time period in dispute. See Dym v. Merit Oil Corporation, 36 A.2d 276 (Conn. 1944) (even for a facility which appeared to be closed for the night, a weighing of the facts can find a facility open where no closed sign is conspicuously displayed at the entrance to the premises and where doors at the facility are unlocked.). In this case, when considered as a whole, the evidence demonstrates Lucky Jimbo's business hours had begun since the establishment was open for business at the time of the inspection by the SLED Agent.

1. Actions of the SLED Agent

The SLED Agent entered Jimmagan's Sports Bar a few minutes after 1:00 p.m., announced who she was, and asked an employee near the bar of JJ's, "Are you open?" The employee responded, "We've just opened." The SLED Agent first inspected the bar area for potential violations of the ABC laws and spent approximately five minutes on that task. Next, she entered the game room of Lucky Jimbo's by means of open doors which lead to five Class III machines in a room with lights on and machines operational. No employee was in the room. The Agent took down the numbers of licenses on the machines in Lucky Jimbo's, did the same for machines in Jimmagan's Sports Bar and began preparing a report. By 1:20 p.m. she had finished her report, explained it to an employee, obtained the employee's signature on the report, and left the premises.

2. Actions of Others

An employee of McDonald was already in the building when the SLED Agent entered at a few minutes after 1:00 p.m. While the Agent conducted the inspection, the McDonald employee was just beginning to remove funds from one of the machines in the game room identified as Jimmagan's Sports Bar. The McDonald employee had not begun to service any other machine and had not serviced any machine in Lucky Jimbo's.

Management of JJ's took no steps to place an employee in Lucky Jimbo's. No one played any Class III machine during the inspection. A second employee had just completed cleaning the game room identified as Lucky Jimbo's. No customers were in any game room, no patrons were at the bar, and no patrons entered the building during the inspection. At no time did any employee of JJ's notify the SLED Agent that JJ's espoused a policy that all machines were considered closed while any machine was having funds removed.

3. Conclusions

DOR has the burden of proof. See 29 Am. Jur. 2d Evidence § 127 (1994) (burden of proof generally rests with the party who asserts the affirmative of an issue). That burden is met in this case.

a. Substantial Facts Support the Room Being Open

Here, the game room had no obvious impediment denying access to patrons. No visible signs were posted noting Lucky Jimbo's was closed; the lights in the room were on; all doors to the room were open; all machines within Lucky Jimbo's were operational. While JJ's argues the room was closed for business, JJ's gave no indication of that at the time of inspection. In fact, JJ's had an excellent opportunity to state the room was closed when presented with the SLED Agent's open-ended question of "are you open." Rather than telling the SLED Agent that any machines or any portion of the facility were closed, the JJ's employee responded, "We've just opened."

Further, while disputed, I find the JJ's employee did not at any point of the inspection tell the SLED Agent that the machines could not be played or that the game rooms were closed. The SLED Agent testified no employee of JJ's told her at any time that any game room or video machines were closed. Diametrically opposed is testimony of a JJ's employee that he told the SLED Agent at the time of receiving the violation report that the machines were unavailable for play.

I place more reliability in the Agent's testimony. See Inabinet v. Inabinet, 236 S.C. 52, 113 S.E.2d 66 (1960) (credibility of testimony is a matter for the finder of fact to judge). The same JJ's employee who testified that he told the SLED Agent the machines could not be played also testified that at the conclusion of the inspection he received a "blue form" somewhat smaller than a normal sheet of paper. In fact, the only form left with the employee was a sheet of paper of normal size and that paper was not blue. The SLED Agent presented the more credible testimony.

b. Lack of Facts Showing the Room Was Closed

Against the weight of evidence that Lucky Jimbo's was open is placed the pertinent evidence seeking to show the room was closed or that the machines in the room were unavailable for play. The evidence falls woefully short of demonstrating that either the room or the machines was closed.

JJ's argues it has a policy of not allowing the play of any machines when any machine is having funds removed and further argues the evidence proves its policy was in effect at the time of the inspection. The central element of JJ's proof is the existence of two facts: a single machine was having funds removed and no patrons were playing any machine. In essence, JJ's proof takes the form of two arguments. The first attempts to prove the machines were closed because they were not played and the second argues the machines were closed because funds were being removed from one machine. Neither is supportive of JJ's position.

i. Illogical Argument

It is undisputed that none of the machines were in play, and it is undisputed that one machine was incapable of play since funds were being removed. These facts give rise to a syllogism in which JJ's commits an error in logic:

The closed machine was unplayed.

The other machines were unplayed.

Therefore, the other machines were closed.

This argument is invalid due to violating the rule of logic known as the undistributed middle. The fact that the closed machine and the other machines share a single common characteristic of being unplayed does not mean they are also alike in all other characteristics, i.e. having the common feature of being closed. Thus, the fact the machines are unplayed or that one machine was closed is not proof the machines in Lucky Jimbo's were closed.

ii. Unpersuasive Argument

A second argument, while not invalid per se, presents a syllogism weak in force. JJ's argues it has a policy that the machines are all closed when any machine in the building is having funds removed. Since an employee was removing funds from one machine and since no one was playing any machine in the building, JJ's argues the policy is proven. The following syllogism sets out JJ's argument:

All machines are closed when funds are removed.

One machine was having funds removed.

Therefore, all machines were closed.

The argument lacks force since it relies upon a false cause.

The occurrence of two events in close proximity, without more, is an insufficient basis upon which to conclude the first event caused the second, i.e. a fallacy of false cause. Here, a McDonald employee was in the building removing funds from one machine. The fact that no one was playing a machine anywhere in the building does not prove the machines were closed as the result of an alleged policy which prohibited play. Rather, a more plausible and much more obvious explanation is that no machines were being played for the simple reason that no patrons were present in the building. In short, I do not believe the evidence supports the existence of the claimed policy.

In reaching this conclusion, I recognize that no direct evidence contradicts the allegation that the policy existed on the date of the inspection. However, the lack of such evidence does not require finding that the existence of the policy is undisputed. In all events, the fact-finder must "pass upon the credibility of the testimony . . . [and] . . . take into consideration [the party's] interest in the result, the accuracy of [the party's] recollection and all of the circumstances and surroundings tending to impeach [the party] as a witness or to throw discredit on [the party's] statements. Jackson v. Jackson, 234 S.C. 291, 108 S.E.2d 86 (1959).

Here, the testimony that the policy existed is from an employee with a vested interest in the outcome. Further, that same employee's recollection has already been found lacking in that no blue form was left with him by the SLED Agent. When considered as a whole, the existence of the claimed policy is not sufficiently proven to allow me to find the policy was in operation on the date of the inspection. Accordingly, the game room of Lucky Jimbo's was open for business during the inspection and no employee was on the premises of Lucky Jimbo's during business hours. Thus, a violation of § 12-21-2804(A) occurred.

4. Conclusions of Law

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

1. Machines authorized under § 12-21-2720(A)(3) are termed Class III machines.

2. No person may maintain licenses or permits for more than five Class III machines at a single place or premises. S.C. Code Ann. § 12-21-2804 (Supp. 1997).

3. For purposes of Class III machines, no statutory definition exists of "single place or premise."

4. A definition of "single place or premise" is supplied by regulation. S.C. Code Ann. Regs. 117-190.

5. The regulatory definition concentrates its analysis of a single place or premises by examining the physical characteristics of the structure enclosing the Class III machines. S.C. Code Ann. Regs. 117-190.

6. If at least two interior structures exist (i.e., each having a proper four wall configuration) and if Class III video games are located within each interior structure, then each interior structure is a video game area. S.C. Code Ann. Regs. 117-190.

7. Deciding whether the video game area is a single place or premises requires the use of a facts and circumstances methodology since a review must consist of all the facts and circumstances to determine if "each area in reality constitutes a single place or premise for video game machines." S.C. Code Ann. Regs. 117-190.

8. The facts and circumstances review requires the existence of four minimum facts with a failure of any one of the four facts resulting in a conclusion that the video game area is not a separate place or premise. S.C. Code Ann. Regs. 117-190.

9. One of the four required facts is that the entity or business must have at least one separate employee on the premises during business hours. S.C. Code Ann. Regs. 117-190.

10. If the Class III video game machines are operational and accessible to customers, an employee is not "on the premises" unless the employee is present in the room identified as the video game area. S.C. Dep't of Revenue and Taxation v. Mickey Stacks, 95-ALJ-17-0742-CC (March 8, 1996), aff'd Court of Common Pleas, Richland County, Civil Action No. 96-CP-40-0889 (March 21, 1997); S.C. Code Ann. Regs. 117-190.

11. An employee is not "on the premises" when the employee is outside the four walls of the video game area even when the employee's physical position enables the employee to observe the room and the employee is performing his job functions at the employee's location.

12. An employee is not "on the premises" even when the employee's absence from the room is for a short period and the absence is for a justifiable reason, e.g., personal physical needs.

13. The language "on the premises" 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).

14. 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 but never to create doubt. See 73 Am. Jur. 2d Statutes § 146, citing Englewood Water Dist. v. Tate, 334 So 2d 626 (Fla. App. 1976).

15. A court cannot seek ways to rewrite the plain language of statutes or regulations in that to depart from the plainly expressed meaning causes the tribunal to legislate rather than interpret since "the 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, 20 S.E.2d 645 (1942).

16. The purpose of the regulation is to provide a high degree of certainty in defining a separate place or premises.

17. The view most consistent with the purpose of the regulation is applying the plain language of "on the premises" to mean that the employee must be within the physical space of the four walls constituting the video game area.

Business hours begin at the moment the location opens for the transacting of its business. See Jolly v. Marion Nat. Bank, 267 S.C. 681, 231 S.E.2d 206 (1976).

Deciding whether a facility is either open or closed for business requires determining a factual issue based upon the totality of the circumstances for the time period in dispute. See Dym v. Merit Oil Corporation, 36 A.2d 276 (Conn. 1944).

20. JJ's's failure to have an employee on the premises of the video game area identified as Lucky Jimbo's at the time of the August 5, 1997 inspection violated the single place or premises provisions regulating the use of Class III machines. S.C Code Ann. § 12-21-2804(A) (Supp. 1997).

B. Revocation


1. Positions of Parties

DOR asserts the statute requires revocation of machine licenses when the single place or premises requirement is violated. Since a violation occurred due to the lack of an employee on the premises occupied by JJ's, DOR argues McDonald's five machine licenses must be revoked. JJ's and McDonald argue that if a revocation is imposed, the revocation should be on the machines but not on the location itself. DOR disagrees and asserts the revocation statute requires a prohibition on the use of any Class III machines at the location for a period of six months from the time the revocation becomes final.

2. Findings of Fact

Based on the preponderance of the evidence, the following findings of fact are entered:

1. JJ's operates five licensed Class III machines in the game room known as Lucky Jimbo's.

2. At the time of the inspection on August 5, 1997, the location known as Lucky Jimbo's held a license issued pursuant to Chapter 36 of Title 12.

3. At the time of the inspection on August 5, 1997, the location known as Lucky Jimbo's was a licensed establishment.

4. DOR has consistently applied its administrative position of imposing a six month prohibition on the use of any Class III machine at a location violating the single place or premises rule.

5. Judicial notice is taken of the extensive opposition to DOR's view in that in hearings before the Division, license holders routinely and repeatedly object to DOR's position.

6. DOR's position has not found routine acceptance by the affected public.

3. Discussion

a. Introduction

DOR "shall revoke the licenses of machines located in an establishment which fails to meet the requirements of this section." S.C. Code Ann. §12-21-2804(A) (Supp.1997). Here, JJ's argues that the revocation should not be imposed on the location but rather should be limited to the machines physically housed inside the offending location.

The following language of § 12-21-2804 is in issue:

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.

This language has produced two interpretations. DOR's interpretation is that once a license for a Class III machine in a location is revoked, the location is prohibited from having any Class III machines on its premises for a period of six months from the date of the revocation. This view is the "dead location" interpretation. JJ's's interpretation is that once the location has a revocation of a Class III machine license, the machines within the establishment (but not the establishment itself) are prohibited from being licensed as Class III machines for a period of six months from the date of the revocation. This view is the "dead machines" interpretation. Considering the plain language of the statute and applying the legislative intent as gleaned from applicable factors, the six month revocation applies to the machines involved and not to the location involved.

b. Legislative Intent

Courts do not legislate. Rather, when asked to interpret the meaning of a statute, the task is solely that of seeking to effectuate the legislature's intent. Laird v. Nationwide Ins. Co., 243 S.C. 388, 395 S.E.2d 206 (1964). In deciding legislative intent, the first and most basic inquiry is asking whether the language of the statute is plain and unambiguous and whether the statute conveys a clear and definite meaning. If the answer is yes, no occasion exists 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, 317 S.C. 434, 454 S.E.2d 890 (1995).

However, where an ambiguity prevents the statute from conveying a clear and definite meaning, the court must find the legislative intent through statutory construction. See Abell v. Bell, 229 S.C. 1, 91 S.E.2d 548 (1956) ("But where the language of the statute gives rise to doubt or uncertainty as to the legislative intent, the search for that intent may range beyond the borders of the statute itself; for it must be gathered from a reading of the statute as a whole in the light of the circumstances and conditions existing at the time of its enactment.") An ambiguity arises when the meaning of the language is doubtful or provides "doubleness of meaning." Chapman v. Metropolitan Life Ins. Co., 172 S.C. 250, 173 S.E. 801, 803 (1934). See Southeastern Fire Ins. Co. v. S.C. Tax Comm'n, 253 S.C. 407, 171 S.E.2d 355 (1969) (language is ambiguous when it is capable of being understood by reasonably well-informed persons in either of two or more senses.).

Here, I am not convinced that the language is devoid of a clear and definite meaning. A plain and unforced reading requires a dead machine result and does not support a dead location result. However, even if the statute creates an ambiguity, an inquiry into statutory construction still leads me to conclude the legislature imposed a six month revocation of machines and not of the location.

1. Plain Meaning

The plain meaning of a statute is best determined by reading the statute as a whole so that phraseology of an isolated section is not controlling. City of Columbia v. Niagara Fire Insurance Company, 249 S.C. 388, 154 S.E.2d 674 (1967). When read as a whole, S.C. Code Ann. § 12-21-2804(A) states that DOR is required to "revoke the licenses of machines located in an establishment which fails to meet the requirements of [§ 12-21-2804]." Under that language, a failure to satisfy the single place or premises requirement causes a revocation of all of the machine licenses in the establishment that failed to meet the test. As a result of that violation, an establishment becomes filled with unlicensed machines.

In fact, that is precisely what has happened in this case. McDonald's five machines in JJ's establishment effectively became unlicensed, and those unlicensed machines were incapable of being lawfully operated until new licenses were issued. See S.C. Code Ann. § 12-21-2776 (Supp.1997) (all machines must be licensed). This factual and legal background supplies the proper context for an unforced reading of the plain language of the six month revocation.

Having revoked all of the machines in the establishment due to the revocation language addressed above, the statutory language then immediately states "[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." In other words, the specific machines that lost their licenses due to the revocation are prohibited from receiving a new machine license until a six month period has elapsed.

When relying upon the plain meaning of words in a statute, the words must be applied without resorting to a subtle or forced construction to limit or expand the statute's operation. Stephen v. Avins Constr. Co., 324 S.C. 334, 478 S.E.2d 74 (Ct. App. 1996). The interpretation expressed above provides a plain, unforced reading answering an obvious need raised by the revocation language. Obviously, to make the revocation meaningful, a fixed period is needed. Otherwise, the owner would be able to acquire a new license the same day as the revocation and begin operating the same machine almost immediately. In my view, the six month period simply tells the owner the machine is dead for six months and serves to give teeth to the revocation of the machine license.(1)

In contrast to the plain reading of the language that supports the dead machine, a reading giving a dead location requires a forced construction. For example, to impose a six month limitation on the location requires reading additional language into the statute so that the statute states "no license may be issued for a machine TO BE PLACED in an establishment in which a license has been revoked for a period of six months from the date of the revocation." (Capitalized words added). Obviously, a court may not add words to a statute but can only apply the statutory language given by the General Assembly. Banks v. Columbia Ry., Gas & Electric Co., 113 S.C. 99, 101 S.E. 285 (1919).

Accordingly, § 12-21-2804(A) imposes a six month prohibition on either DOR issuing or an owner acquiring licenses on those Class III machines that were in an establishment at the time any machine in that establishment was revoked. No revocation is imposed on the location itself.

2. Statutory Construction

While I believe a plain reading requires a dead machine interpretation, even if resort to statutory construction is required, such an inquiry does not support a dead location view.

A commonly applied rule of statutory construction is that where the same words are used in an enactment more than once it is presumed the words have the same meaning throughout unless a different meaning is necessary to avoid an absurd result. Busby v. State Farm Mut. Auto. Ins. Co., 280 S.C. 330, 312 S.E.2d 716 (Ct. App. 1984). Likewise, when the legislative body defines a term, the use of that term in the enactment must be interpreted as having the defined meaning. Windham v. Pace, 192 S.C. 271, 6 S.E.2d 270 (1939).

In the Video Game Machines Act (Act), Class III machines must be licensed under Article 19 before placement or operation on the premises of a "licensed establishment." S.C. Code Ann. § 12-21-2778 (Supp.1997). The legislature defined "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." S.C. Code Ann. § 12-21-2772(5) (Supp.1997). To impose a location penalty, the legislature could simply have stated the establishment may not be a licensed establishment for six months. No such statement was made.

In addition to the Article 19 licensed establishments, Article 20 imposes, at a minimum, a separate and additional license for an establishment. Specifically, a location license is required since "[e]ach . . . 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."(2) S.C. Code Ann. § 12-21-2784 (Supp. 1997) (emphasis added). The location license of Article 20 is identified as an "establishment license for machine placement." S.C. Code Ann. § 12-21-2788 (Supp. 1997). In fact, DOR is required to revoke "an establishment license for machine placement" when the placement of machines do not meet "the provisions of Article 19 of this chapter and the rules and regulations promulgated by [DOR]." Id. (3) Again, the General Assembly could have easily penalized the location by revoking the establishment license for machine placement. Finally, the location may not house Class III machines "unless the location is licensed pursuant to the provisions of Chapter 36 of Title 12." S.C. Code Ann. § 12-21-2703 (Supp. 1997). Accordingly, at least three areas of location or establishment licenses are available for revocation, but § 12-21-2804(A) chooses to revoke only "licenses of machines."

These statutes demonstrate the General Assembly was cognizant of the difference between a license for a machine and a license involving an establishment or location. In § 12-21-2804(A) the General Assembly provided for the revocation of the licenses for the machines and made no mention of revocation of an establishment license. A common sense reading shows a symmetry exists between the revocation and the period of revocation and further that the symmetry is broken by the dead location view. For example, a revocation of a machine license gives a six month machine revocation. No symmetry results from revoking a machine license and then concluding the location is penalized for six months. Had the General Assembly meant to revoke the establishment or location license it could have easily done so by specifying the revocation of a specific establishment license. Accordingly, the normal rules of statutory construction support the dead machine interpretation.

3. Deference To DOR's Position

DOR argues its position should be followed since it is the agency charged with administering the video games law. DOR believes the facts are well established that it has consistently applied its interpretation of S.C. Code Ann. § 12-21-2804(A) (Supp. 1997). Further, under such circumstances, DOR believes that its position is reasonable and should be accorded great deference. Finally, in deciding whether to deviate from DOR's position, compelling reasons must be established. In significant part, I disagree with DOR's analysis as it relates to the weight to be accorded DOR's interpretation of S.C. Code Ann. § 12-21-2804(A) (Supp. 1997).

a. Consistently Applied Position

No doubt exists that DOR has consistently applied its position. Judicial notice is taken of the published decisions of the Administrative Law Judge Division and of the numerous instances in which DOR has advanced this position in hearings before the Division. DOR has consistently viewed S.C. Code Ann. § 12-21-2804(A) as imposing a six month prohibition on the use of any Class III machine at the offending location.

However, judicial notice is also taken of the extensive opposition to DOR's view. In hearings before the Division, license holders routinely and repeatedly object to DOR's position. The validity of that position is now pending in the S.C. Supreme Court in the case of Gateway Enterprise, Inc. v. DOR. Thus, the position of DOR is not one which has found routine acceptance by the affected public. On the contrary, DOR's position is far from a settled view.

b. Deference To DOR's Position

The issue in interpreting a statute is what did the legislature intend. Laird v. Nationwide Ins. Co., 243 S.C. 388, 395 S.E.2d 206 (1964). Depending upon the nature of the language under review, an agency's view may or may not be entitled to deference.

i. Plain Meaning

No deference to an agency's position is warranted where the language presents a clear meaning. Glens Falls Insurance Co. v. City of Columbia, 242 S.C. 237, 130 S.E.2d 573 (1963) (no occasion arises for considering an agency's position where the language of the statute is plain and unambiguous and conveys a clear and definite meaning). Further, of particular significance to this case, the clear and definite meaning will always be applied despite an agency's contrary but consistently followed position. Davidson v. Eastern Fire & Cas. Ins. Co., 245 S.C. 472, 141 S.E.2d 135 (1965) ("An uninsured motorist endorsement that contravenes the requirements of the statute is, to that extent, invalid, regardless of the Department's approval of it.").

Here, the statute in dispute is plain and unambiguous. The plain language of § 12-21-2804(A) imposes a six month prohibition on either DOR issuing or an owner acquiring licenses on those Class III machines that were in an establishment at the time any machine in that establishment was revoked. Thus, having found the plain meaning of the statute establishes legislative intent, no deference to DOR's position is required.





ii. Ambiguous Meaning

However, even if an ambiguity were found in the statute, a resort to rules of construction supports the view that the revocation affects the machines but not the location. In examining the rules of construction, deference to DOR's view is not a meaningful indicator of legislative intent when compared to other more significant indicators.

When required to apply the rules of construction, the construction of a statute by an agency charged with administering that statute is entitled to most respectful consideration. Stephenson Finance Co. v. South Carolina Tax Comm'n, 242 S.C. 98, 130 S.E.2d 72 (1963). More particularly, however, the degree of respect rises to one of "great weight" only if the agency position "has been acquiesced in by the Legislature for a long period of time." Etiwan Fertilizer Co. v. South Carolina Tax Comm'n, 217 S.C. 354, 60 S.E.2d 682 (1950).

Here, the Video Games Machine Act became effective July 1, 1993. Thus, even assuming DOR's position was announced, enforced or in some way made known to the Legislature from the first day the statute became effective, DOR's position is less than five years old. Such a time frame is far too short to amount to a showing of acquiescence "by the Legislature for a long period of time." Id. Hence, the short period does not show strong evidence of acquiescence by the Legislature and does not allow according "great weight" to DOR's position. Such is especially so where the agency position is challenged repeatedly by the affected public. At best, only respectful consideration is due.

The Legislature is presumed to have knowledge of its own laws. See Ingram v. Bearden, 212 S.C. 399, 47 S.E.2d 833 (1948)(a machine was definitely outlawed by prior statute and the General Assembly was deemed to be aware of that fact). Respectful consideration to DOR's position (which consideration relies upon a presumption that the Legislature has knowledge of and gives tacit approval to the agency's actions) pales in comparison to the Legislature's presumptive knowledge of its own laws. The Legislature intentionally created licensed establishments and created machine licenses. Further, the Legislature defined licensed establishments and demonstrated it clearly knew the difference between machine licenses and establishment licenses. Thus, reliance upon the Legislature's knowledge of its own laws is a far superior indicator of legislative intent than reliance upon the respectful consideration of DOR's position.

c. Compelling Reasons

While others may exist, at least two compelling reasons warrant deviating from DOR's view. First, DOR's position is inconsistent with the plain meaning of the statute such that reliance upon DOR's view places far too much weight on an administrative interpretation. See Stone Mfg. Co. v. South Carolina Employment Sec. Comm'n, 219 S.C. 239, 64 S.E.2d 644 (1951) citing F. W. Woolworth Co. v. United States, 91 F.2d 973, 976 (2d. Cir. 1937) ("At most, administrative practice is a weight in the scale, to be considered, but not to be inevitably followed. * * * While we are of course bound to weigh seriously such rulings, they are never conclusive."). Second, a compelling reason to deviate from DOR's view is that following the position perpetuates an administrative error. Fennell v. South Carolina Tax Commission, 233 S.C. 43, 103 S.E.2d 424 (1958) (an interpretation presented by an administrative position is not so sacrosanct as to be beyond the correction of error; it need not perpetuate error). In short, sufficient and compelling reasons exist to deviate from DOR's position.

4. Conclusions of Law

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

1. No more than five Class III machines may be located at a single place or premises. S.C. Code Ann. § 12-21-2804(A) (Supp. 1997).

DOR "shall revoke the licenses of machines located in an establishment which fails to meet the requirements of this section." S.C. Code Ann. 12-21-2804(A) (Supp. 1997).

A six month period of revocation is imposed. S.C. Code Ann. § 12-21-2804(A) (Supp. 1997).

The revocation of one machine license in an establishment violating the single place or premises requirement causes the revocation of all machine licenses at the offending establishment and creates an establishment filled with unlicensed machines. S.C. Code Ann. § 12-21-2804(A) (Supp. 1997).

Unlicensed machines cannot be lawfully operated until a new license is issued. S.C. Code Ann. §§ 12-21-2776 and 12-21-2778 (Supp. 1997).

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. S.C. Code Ann. § 12-21-2804(A) (Supp. 1997).

Under a plain reading, DOR is prohibited from issuing a license, the prohibition extends for six months from the date a revocation is made, and the objects of the prohibition are the machines on the premises at the time of the revocation action. S.C. Code Ann. § 12-21-2804(A) (Supp. 1997).

The license being revoked is a machine license and is neither a location license nor an establishment license since the statute in dispute directs a revocation of "the licenses of machines" and "[a]ll machines must be licensed by [DOR]." S.C. Code Ann. §§ 12-21-2776(A) and 12-21-2804(A)(Supp. 1997).

Under the Video Game Machines Act, a plain and unforced reading of the statute imposes a six month limitation on the machine since the license revoked is a machine license. S.C. Code Ann. § 12-21-2804(A) (Supp. 1997).

A location must hold a retail license since no licensed Class III machines are allowed "unless the location is licensed [by Title 12, Ch. 36]." S.C. Code Ann. § 12-21-2703 (Supp. 1997).

"Licensed establishment" means an establishment owned or managed by a person holding a Class III license. S.C. Code Ann. § 12-21-2772(4) (Supp. 1997).

To impose the six month limitation on the location when the license being revoked is a machine license removes the symmetry of the statute.

Maintaining a symmetry for a six month prohibition on locations requires language limiting the retail license, the "establishment license," or the "licensed establishment."

Revocation of a machine license imposes a six month prohibition on the machines and not on the location.

A court may not add words to a statute but can only apply the statutory language given by the General Assembly. Banks v. Columbia Ry., Gas & Electric Co., 113 S.C. 99, 101 S.E. 285 (1919).

Imposing a six month limitation on the location requires an improper reading of additional language into the statute.

The issue in interpreting a statute is what did the legislature intend. Laird v. Nationwide Ins. Co., 243 S.C. 388, 395 S.E.2d 206 (1964).

No deference to an agency's position is warranted where the language presents a clear meaning. Glens Falls Insurance Co. v. City of Columbia, 242 S.C. 237, 130 S.E.2d 573 (1963).

The clear and definite meaning will always be applied despite an agency's contrary but consistently followed position. Davidson v. Eastern Fire & Cas. Ins. Co., 245 S.C. 472, 141 S.E.2d 135 (1965).

If an ambiguity were found, applying the rules of construction would not allow deference to DOR's view to be a meaningful indicator of legislative intent when compared to other more significant indicators.

When required to apply the rules of construction, the construction of a statute by an agency charged with administering that statute is entitled to most respectful consideration. Stephenson Finance Co. v. South Carolina Tax Comm'n, 242 S.C. 98, 130 S.E.2d 72 (1963).

The degree of respect, however, rises to one of "great weight" only if the agency position "has been acquiesced in by the Legislature for a long period of time." Etiwan Fertilizer Co. v. South Carolina Tax Comm'n, 217 S.C. 354, 60 S.E.2d 682 (1950).

A position of less than five years is not one acquiesced in "by the Legislature for a long period of time." Id.

Such a position is not entitled to "great weight" and at best warrants only a respectful consideration.

The Legislature is presumed to have knowledge of its own laws. See Ingram v. Bearden, 212 S.C. 399, 47 S.E.2d 833 (1948).

Respectful consideration to DOR's position is an insufficient indicator of legislative intent when compared to Legislature's presumed knowledge of its own laws.

A compelling reason to deviate from DOR's position is that DOR's position is inconsistent with the plain meaning of the statute such that reliance upon DOR's view places far too much weight on an administrative interpretation. Stone Mfg. Co. v. South Carolina Employment Sec. Comm'n, 219 S.C. 239, 64 S.E.2d 644 (1951) citing F. W. Woolworth Co. v. United States, 91 F.2d 973, 976 (2d. Cir. 1937).

A compelling reason to deviate from DOR's position is that following the position perpetuates an administrative error. Fennell v. South Carolina Tax Comm'n, 233 S.C. 43, 103 S.E.2d 424 (1958).







C. Amount of Penalty


1. Positions of Parties

DOR asserts a penalty of $5000 is due from McDonald as the holder of the machine license and $5000 is due from JJ's as the operator of the premises. Both JJ's and McDonald argue the penalty is too severe.

2. Findings of Fact

Based on the preponderance of the evidence, the following findings of fact are entered:

1. JJ's's policy is that an employee must be in the room when the business is open.

2. At one point during the day of August 5, 1997, no employee was present in the game room known as Lucky Jimbo's.

3. McDonald owns the licensed machines located in Lucky Jimbo's and leases the machines to JJ's.

4 Management of the room in which the Class III machines were located was in JJ's.

5. Control of the Class III machines in the game room known as Lucky Jumbo's was in McDonald.

3. Discussion

A violation of 12-21-2804(A) results in the imposition of a fine. S.C. Code Ann. § 12-21-2804(F) (Supp. 1997). The person liable for the fine is the person who committed the violation. S.C. Code Ann. § 12-21-2804(F) (Supp. 1997). The only violation here is that of exceeding the five machine limit for a single place or premises.

a. Person Liable

The person to whom the five machine limit applies and the person required to obtain a license for the privilege of making use of the Class III machines is the person who "maintains for use or permits the use of [Class III machines] on a place or premises occupied by him." S.C. Code Ann. § 12-21-2720(A) (Supp. 1997). Thus, finding the persons who either maintain Class III machines or who permit Class III machines on a place or premises occupied by such persons gives the parties liable for a fine.

Here, JJ's permitted the Class III machines in the game room known as Lucky Jimbo's. Further, McDonald as the lessor of the machines is a person who maintains Class III machines for play. Thus, as long as the Class III machines are on a place or premises occupied by JJ's and McDonald, a violation of the single place or premises requirement results in both JJ's and McDonald being liable for a penalty.

A premises is occupied when it is held for use. 67 C.J.S. Occupy (1978). Here, JJ's uses the room for its retail business and McDonald uses the room for his leasing business. Accordingly, both JJ's and McDonald occupy the premises. JJ's permits the use of Class III machines and McDonald maintains Class III machines. Both are liable for fines.

b. Amount of Fine

Where the General Assembly authorizes a range for an administratively imposed penalty, the administrative adjudicator sitting as the fact-finder may set the amount of the penalty after a hearing on the dispute. Walker v. South Carolina ABC Comm'n, 305 S.C. 209, 407 S.E.2d 633 (1991). When penalty disputes are part of the factual issues for decision, the fact-finder must receive evidence and make a determination on all such factual disputes arising from the contested case. S.C. Code Ann. § 1-23-350 (Rev. 1986).

Here, the evidence establishes that JJ's failed to properly instruct his employees on their duty to physically occupy the premises. I do recognize, however, that the inspection occurred only minutes after the location opened. Under all of the circumstances here, a fine of $2500 is appropriate. McDonald, on the other hand, had no management control at the location. However, McDonald derives income from the machines on the premises of JJ's since the two share the proceeds from the machines. A party who derives income from the machines should not be dismissed from liability for violations on the very premises that produce that income. Given McDonald's lesser control in this matter, McDonald is liable for a penalty of $1000.

4. Conclusions of Law

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

1. DOR "shall revoke the licenses of machines located in an establishment which fails to meet the requirements of this section." S.C. Code Ann. 12-21-2804(A) (Supp. 1997).

One requirement of 12-21-2804(A) is that no more than five machines be located at a single place or premises. S.C. Code Ann. 12-21-2804(A) (Supp. 1997).

As the fact-finder, the administrative law judge is empowered 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).

The administrative law judge has the authority to establish the monetary fine within an allowable range. S.C. Code Ann. § 12-21-2804(A) (Supp. 1997). S.C. Code Ann. § 12-4-30(D) (Supp. 1997).

  1. McDonald, though not primarily responsible for the management of the subject location, had an adequate interest and control of the operation of the machines to be held accountable for the operation of more than five Class III machines at a single place or premise, and therefore is liable for a fine. S.C. Code Ann. § 12-21-2804(F).
  2. Because of McDonald's limited role in the management and operation of the subject location, a $1000 fine is reasonable and appropriate.
  3. JJ's was primarily responsible for the management of the subject location and failed to comply with the single place or premises requirement thus warranting a fine. S.C. Code Ann. § 12-21-2804(F).
  4. Given JJ's's interest and control, a fine of $2500 is proper. S.C. Code Ann. § 12-21-2804(F).


IV. Order


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

JJ's is subject to a $2500 fine and McDonald is subject to a $1000 fine. The licenses for the machines in the establishment of Lucky Jimbo's at the time of the violation are revoked. Those machines may not obtain a license for six months from the date of this order. No prohibition, however, is placed upon the location of Lucky Jimbo's itself.



AND IT IS SO ORDERED

______________________

RAY N. STEVENS

Administrative Law Judge

Dated: March 19, 1998

Columbia, South Carolina

1. Certainly, the dead machine view allows the location owner to buy or lease new machines, purchase new licenses and begin operation almost immediately at the same location. However, the machine revocation penalty is meaningful since the cost includes new licenses, new machines, and leaves old machines that are worthless for six months. The General Assembly provided this result and a court should not rewrite statutes to provide a "better" penalty since such matters rest solely within the wisdom of the General Assembly. Creech v. South Carolina Pub. Serv. Auth., 200 S.C. 127, 20 S.E.2d 645 (1942).

2. The additional license of Article 20 applies to other entities as well in that machine manufacturers, distributors, and operators must obtain the Article 20 license.

3. The "establishment license for machine placement" is not the retail sales tax license of S.C. Code Ann. § 12-36-510 (Supp. 1997) required by S.C. Code Ann. § 12-21-2703 (Supp. 1997). The name "retail license" is well known by the legislature. Had the legislature meant "retail license" in § 12-21-2788 it would have used that name rather than the unusual name of "establishment license for machine placement." Rather, the Article 20 "establishment license" is the license required (albeit currently postponed in part until December 31, 1998) to assure Class III machines meet the technology demands of §§ 12-21-2782 and 12-21-2783. S.C. Code Ann. § 12-21-2782 (Supp. 1997).


Brown Bldg.

 

 

 

 

 

Copyright © 2022 South Carolina Administrative Law Court