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. Betty Bowles, John D. Webster, and A & E Distribution, Inc.

AGENCY:
South Carolina Department of Revenue

PARTIES:
Petitioners:
South Carolina Department of Revenue

Respondents:
Betty Bowles, John D. Webster, and A & E Distribution, Inc.
 
DOCKET NUMBER:
97-ALJ-17-0771-CC

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

Respondent, Betty Bowles: Pro se

Respondent, John D. Webster: Pro se

Respondent, A & E Distribution, Inc.: Wayne R. Covert, Jr., Esq.

Parties Present: All Parties
 

ORDERS:

ORDER

I. Statement of the Case


South Carolina Department of Revenue (DOR) seeks the revocation of five Class III machines, prohibition of the use of any Class III machines for six months at the offending location, and a total fine of $10,000. Betty Bowles (Bowles), John D. Webster (Webster), and A & E Distribution, Inc. (A & E) oppose DOR's position and assert no revocation or fine is warranted. The disagreement 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 16, 1998 at the Edgar Brown Building, Columbia, South Carolina.

Based upon the evidence and the argument presented by the parties, the revocation of licenses of the five machines located in the game room identified as Fair Play Games II and owned by A & E is ordered. The location is unaffected by the machine license revocation but the five machines involved in the revocation may not be licensed for six months from the date of this order. Finally, a fine of $1500 is imposed on Bowles and a $1000 penalty is imposed upon A & E. .







II. Issues

Did a violation of the single place or premises requirement of § 12-21-2804(A) and S.C. Code Regs. 117-190 occur by Bowles failing to have at least one separate employee on the premises during business hours?

III. Analysis


A. Single Place or Premises


1. Positions of Parties

DOR asserts the game room identified as Fair Play Games II did not have an employee on the premises during all business hours. Accordingly, such violation warrants a revocation and a fine. Bowles and A & E disagree and argue that they were unaware that an employee had to be physically present in the room at all hours. They argue a single mistake should not result in a revocation and fine.

2. Findings of Fact

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

  1. A & E holds several licenses for Class III video game machines.
  2. Bowles operates a video gaming business in a mall-type structure containing two video gaming rooms located at 4861 Highway 17 Bypass South, Myrtle Beach, South Carolina.
  3. Ten Class III machines are physically located in the building structure at 4861 Highway 17 Bypass South.
  4. The ten Class III machines are licensed to A & E, the machines are owned by A & E, and the machines are provided to Bowles under a contract that provides to A & E a percentage of the funds generated by the machines.
  5. On August 26, 1997, a SLED Agent conducted an inspection of the video gaming businesses located at 4861 Highway 17 Bypass South, Myrtle Beach, South Carolina.
  6. The inspection included walking into each area, listing the license numbers for machines located in the open game rooms, taking photographs of the location, examining the business licenses, retail tax licenses, and utility meters for the location, and talking to an employee at the location.
  7. Of the two game rooms, both were open for business at the date and time of inspection.
  8. The open room had its door open and contained five Class III machines with each machine operational.
  9. At the time of the inspection of the two game rooms, an employee was present in only one game room and no employee was present in the other game room.
  10. The following video game machine licenses were affixed to machines located in the respective game rooms:

Fair Play I
Fair Play II
3805993

3805994

3806722

3805995

3805996
3805997

3806720

3806721

3806723

3806724



  1. As a result of the inspection, both Bowles and A & E were found in violation of S.C. Code § 12-21-2804(A) and 27 S.C. Code Ann. Regs. 117-190 (Supp. 1997) for operation of more machines in a single place or premise without an employee present.
  2. A copy of the violation report was left with Bowles.
  3. DOR seeks a $5,000 fine against A & E as the owner and licensee of the machines.
  4. DOR seeks a $5,000 fine against Bowles as the operator of the game room


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). The statute does not explain what constitutes a single place or premise. A definition is supplied, however, by Regulation 117-190.

Regs. 117-190 concentrates its analysis of a single place or premises by examining the physical characteristics of the structure enclosing the Class III machines and gives particular attention to exterior walls surrounding two or more video game areas. 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. Under such circumstances the inquiry becomes whether each video game area is a single place or business allowing five machines within each area.

The answer is reached by a facts and circumstances methodology imposed by Regs. 117-190. Under the regulation DOR "must review all the facts and circumstances to determine if each area in reality constitutes a single place or premise for video game machines." While a facts and circumstances review is normally very general, the regulation requires the existence of a minimum four facts. Indeed, a failure to meet any one of the four facts results in the video game area not being a separate place or premise. The only factor in dispute here is whether on August 26, 1997, the business operated with at least one separate employee on the premises during business hours.



b. Law Addressing Employee On the Premises

A difference of opinion exists on whether the employee must be within the four walls of the area in question in order to be "on the premises."

One view is that an employee is not considered to be "on the premises" when the employee is working outside the game room if the Class III video game machines are operational and accessible to customers; i.e., an employee must be present in the room. (The four-walls position.) S.C. Dep't of Revenue and Taxation v. Mickey Stacks, 95-ALJ-17-0742-CC (March 8, 1996). A contrary view is that the test is met even if the employee is outside the four walls so long as the employee's physical position enables the employee to observe the room and the employee is performing his job functions at the employees location. (The within-view-of-the-four-walls position). South Carolina Department of Revenue v. Great Games, Inc., Docket No. 96-ALJ-17-0204-CC, (January 22, 1997). In a similar vein, a view exists that an employee's absence from the room is permissible if the absence is for a short period and the absence is for a justifiable reason, e.g., personal physical needs. (The short-legitimate-absence position). DOR v. Ace Music Company of Spartanburg, Inc., 97-ALJ-17-0309-CC (October 19, 1997).

I agree with the four-wall position and respectfully disagree with both the within-view-of-the-four-walls position and the short-legitimate-absence position. While at first blush it may seem reasonable to provide exceptions to the four-wall rule, closer analysis dictates otherwise.

First, relying upon the rules of statutory construction to justify exceptions to the plain language is unwarranted. 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). 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).

Here, the language of the statute and the regulation is clear. The statute and regulation allows no more than five machines in a single place or premises. Where, as is the case in this matter, at least two interior structures exist with machines inside those structures, each interior structure is a "video game area." None of the video game areas can acquire the status of a separate single place or premises unless an employee is "on the premises during business hours." The premises, upon which the employee must be "on," is the space identified as the "video game area." An employee cannot be on the premises of an identified space if the employee is physically someplace else. Accordingly, once the employee physically leaves the space of the video game area, the employee is no longer "on the premises."

Second, a court can not seek ways to rewrite statutes or regulations. 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, 146, 20 S.E.2d 645, 652 (1942). In short, an ALJ cannot add conditions to the "on the premises" language of the regulation in an effort to provide exceptions that seek to improve upon what the General Assembly has plainly promulgated.

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

c. Facts of Employee On the Premises

Here, A & E holds several Class III video game machines licenses which it provides to Bowles under a contract to share the funds produced by the machines. Bowles operates a video gaming business in a mall-type structure containing two video gaming rooms located at 4861 Highway 17 Bypass South, Myrtle Beach, South Carolina. On August 26, 1997, SLED Agents conducted an inspection of the video gaming businesses at that location. The inspection included walking into each area, listing the license numbers for machines located in the open game rooms, taking photographs of the location, examining the business licenses, retail tax licenses, and utility meters for the location, and talking to an employee at the location. Of the two game rooms, both were open for business at the date and time of inspection. Each of the rooms had its door open and contained five Class III machines in each room and each machine was operational. At the time of the inspection of the two game rooms, an employee was present in only one of the rooms with no employee present in the remaining room.

DOR bears the burden of proving that one of the rooms was without a separate employee. See 29 Am. Jur. 2d Evidence § 127 (1994) (burden of proof generally rests with the party who asserts the affirmative of an issue). Here, DOR has meet its burden. Accordingly, the room without an employee does not constitutes a separate place or premises and thus results in a violation of Section 12-21-2804(A) having occurring on August 26, 1997 at the video gaming businesses located at 4861 Highway 17 Bypass South, Myrtle Beach, South Carolina.









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 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.

18. Bowles' failure to have an employee on the premises of the video game area identified as Fair Play Games II at the time of the August 26, 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 the 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 Bowles, DOR argues A & E's five machine licenses must be revoked. A & E and Bowles argue the violation was unintentional and should not require revocation. A & E asserts it was not on the premises and knew nothing of the violation and thus cannot have its licenses revoked.

2. Findings of Fact

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

1. On August 26, 1997, Bowles had an employee in the game room identified as Fair Play Games II.

2. The employee left the premises to obtain a medicine authorized by prescription.

3. The game room of Fair Play Games II remained open after the employee left the premises.

4. At the time of the inspection by SLED the Bowles' employee had not returned.

5. The game room identified as Fair Play Games II had no employee on the premises at the time of the inspection on August 26, 1997.

3. Discussion

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, Bowles and A & E argue the violation was unintentional and should not result in revocation.

While somewhat broader language applied to machines licensed for operation during the one year period from July 1, 1993 until July 1, 1994, after July 1, 1994, DOR "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." S.C. Code Ann. § 12-21-2804(A) (Supp. 1997). The General Assembly did not impose a duty of finding the violator had any degree of intention such as knowingly, intentionally or willfully. Moreover, the General Assembly has demonstrated that when it wanted to impose scienter as a part of a violation it did so by specific language. See S.C. Code Ann. §12-21-2804(F) (upon a determination that a violation is wilful, criminal prosecution may be pursued). Since the statutory language does not impose knowledge as a requirement, none can be added.

Instead of an intention to violate the law, all the statute demands is proof that a license is being maintained for more than five machines at a single place or premises. Accordingly, the fact that Bowles did not intend to violate the regulatory scheme does not dismiss the fact that no employee was in the game room while the business was open and while the machines were available for play. Accordingly, a violation of 12-21-2804(A) occurred and revocation is warranted.

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 S.C. Code Ann. § 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).

Bowles violated the single place or premises requirement by not having a separate employee on the premises of the five Class III machines located in the game room identified as Fair Play Games II. S.C. Code Ann. § 12-21-2804(A) (Supp. 1997).

The General Assembly did not impose a duty of finding the violator must have any degree of intention such as knowingly, intentionally or willfully having more than five machines at a single place or premises. S.C. Code Ann. § 12-21-2804(A) (Supp.1997).

The General Assembly demonstrated that when it wanted to impose scienter as a part of a violation it did so by specific language. See S.C. Code Ann. § 12-21-2804(F) (Supp. 1997).

Instead of an intention to violate the law, the statute demands proof that a license has been in fact maintained for more than five machines at a single place or premises. S.C. Code Ann. § 12-21-2804(A) (Supp.1997).

The fact that Bowles did not intend to violate the regulatory scheme does not negate the fact that no employee was in the game room while the business was open and while the machines were available for play.

A & E's five licenses for the Class III machines identified as 3805997, 3806720, 3806721, 3806723, and 3806724 must be revoked. S.C. Code Ann. § 12-21-2804(A)(Supp.1997).





C. Period of Revocation


1. Positions of Parties

DOR 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. Bowles, A & E and Webster all argue that if a revocation is applied, no six month penalty should be imposed on the location.

2. Findings of Fact

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

1. Bowles housed five Class III machines in the game room known as Fair Play II.

2. At the time of the inspection on August 26, 1997, the location known as Fair Play II held a license issued pursuant to Chapter 36 of Title 12.

3. At the time of the inspection on August 26, 1997, the location known as Fair Play II 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

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. A & E'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 (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. It seems to me that 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. A & E's five machines in Bowles' 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 Commission, 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. S.C. Tax Commission, 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. Com'n, 219 S.C. 239, 64 S.E.2d 644 (1951) citing F. W. Woolworth Co. v. United States, 2 Cir., 91 F.2d 973, 976 ("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)(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)(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 Commission, 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. S.C. Tax Commission, 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. Com'n, 219 S.C. 239, 64 S.E.2d 644 (1951) citing F. W. Woolworth Co. v. United States, 2 Cir., 91 F.2d 973, 976.

A compelling reason to deviate from DOR's position 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).

D. Amount of Penalty


1. Positions of Parties

DOR asserts a penalty of $5000 is due from A & E as the holder of the machine license and also from Bowles as the operator of the room. Both Bowles and A & E 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. Bowles did not realize that an employee had to be physically located within the game room but rather believed that an employee merely had to be available for the room.

2. At one point during the day of August 26, 1997, no employee was present in the game room known as Fair Play Games II.

3. A & E is the owner of the machines and derives income from the machines under a contract with Bowles in which the two share the funds generated by the machines.

4 Management of the room in which the Class III machines were located was in Bowles.

5. Control of the Class III machines in the game room known as Fair Play II was in A & E as the owner of those machines.

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, Bowles permitted the Class III machines in the game room known as Fair Play Games II. Further, A & E maintains Class III machines for play. Thus, as long as the Class III machines are on a place or premises occupied by Bowles and A & E, a violation of the single place or premises requirement results in each Bowles and A & E being liable for a penalty. A premises is occupied when it is held for use. 67 C.J.S. Occupy (1978). Here, Bowles uses the room for her retail business and A & E uses the room to derive its income for a share of the proceeds. Accordingly, both Bowles and A & E occupy the premises since Bowles permits the use of Class III machines, and A & E 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 Bowles is a relatively unsophisticated operator. Further, she is no longer in the business due to her admission that she did not wish to operate a business having the possible problems associated with video poker. Under all of the circumstances here, a fine of $1500 is appropriate.

A & E did not exercise management control at the location. However, a party who receives a portion of the proceeds from the machines must also absorb responsibility for violations occurring in the production of those proceeds. Given the fact that a far lesser degree of control was in A & E, a fine of $1000 is proper.

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." 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. 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. A & E, though not primarily responsible for the management of the subject location, had an adequate interest in the revenue along with full control of the machines to be held accountable for the violation of operating 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 A & E's limited role in the management and operation of the subject location, a $1000 fine is reasonable and appropriate.
  3. Bowles 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 Bowles's interest and control and the circumstances in this case, a fine of $1500 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:

The five licenses issued to A & E and used in the game room identified as Fair Play Games II are revoked. Bowles' location at 4861 Highway 17 Bypass South, Myrtle Beach, South Carolina, is unaffected by the revocation. However, the five machines operated in the game room of Fair Play Games II may not be licensed for six months from the date of this order. Finally a fine of $1500 is imposed on Bowles, and a fine of $1000 is imposed on A & E.

AND IT IS SO ORDERED

______________________

RAY N. STEVENS

Administrative Law Judge

Dated: March 17, 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.

 

 

 

 

 

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