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. Mid-South, Inc., and Coastal Coin, Inc.

AGENCY:
South Carolina Department of Revenue

PARTIES:
Petitioners:
South Carolina Department of Revenue

Respondents:
Mid-South, Inc., and Coastal Coin, Inc.
 
DOCKET NUMBER:
98-ALJ-17-0118-CC

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

Respondent, Mid-South, Inc. and Coastal Coin, Inc.: H. Buck Cutts, Esq.

Parties Present: All Parties
 

ORDERS:

FINAL ORDER AND DECISION

I. Statement of the Case


The South Carolina Department of Revenue (DOR) seeks the revocation of licenses for ten Class III video poker machines, a prohibition on the use of any Class III machines at the offending location for a six month period, and fines of $5,000 on the machine owner, Coastal Coin, Inc. (Coastal) and $5,000 on the location owner, Mid-South, Inc. (Mid-South). DOR has cited Mid-South and Coastal with violating S.C. Code Ann. 12-21-2804(A) (Supp. 1997). Both Coastal and Mid-South oppose DOR's position by asserting no violation occurred.(1) The hearing in this matter was held on June 2, 1998 at the Charleston County Courthouse, Charleston, South Carolina.

Based upon the evidence and the arguments presented by the parties, the ten machine licenses are revoked. However, the location is not affected by the revocation. Rather, the ten machines in the location on the date of violation may not be relicensed for six months from the date of this order. Further, a fine of $5,000 each is imposed on Mid-South and on Coastal.





II. Issues

1. Did Mid-South and Coastal violate the single place or premises requirement of S.C. Code Ann. § 12-21-2804(A) and 27 S.C. Code Ann. Regs. 117-190 (Supp. 1997) by failing to have separate utility meters or failing to have at least one separate employee on the premises during business hours?

2. If a violation occurred, are all ten of Coastal's licenses subject to revocation despite Coastal's lack of knowledge of the failure to have at least one separate employee on the premises during business hours?

3. If a violation occurred, are Coastal and Mid-South denied the use of any Class III machines at the location for a period of six months from the time the revocation becomes final or are Coastal and Mid-South merely denied the privilege of using the ten machines for a period of six months from the time the revocation becomes final?

4. If a violation occurred, does the expiration of a machine license prior to the final merits hearing prevent a revocation of that license as well as the resulting six month prohibition on re-licensing?

5. If a violation occurred, what monetary fine, if any, should be imposed on Coastal and Mid-South?

III. Analysis


A. Single Place or Premises


1. Positions of Parties

DOR asserts two game rooms were operational at the time of its inspection but only one employee was in the building at the time of the inspection. Further, even that employee was not physically within in a game room. Finally, DOR argues only a single electric utility meter was operational for the two game rooms. DOR argues that the lack of an employee physically present within each game room and the lack of two operational electric utility meters is a violation of the single place or premises requirement of Regs. 117-190.

Mid-South and Coastal disagree. They argue an employee does not need to be present in each game room. Rather, all that is required is that a separate employee must be assigned to each room. They argue that a separate employee was assigned to each room, that one assigned employee was physically in the building, and that the second assigned employee had been gone only a few minutes and was at the bank. Finally, Mid-South and Coastal argue two electric utility meters were operational at the time of the inspection. Thus, Mid-South and Coastal argue no violation occurred.

2. Findings of Fact

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

Coastal holds several licenses for Class III video game machines with ten of those licenses utilized at 1111 Main Street, Summerville, South Carolina. The building at the Summerville address contains a video game business in a mall-type structure housing two video game rooms. Mid-South holds two retail sales tax licenses for the two video game rooms, with the game rooms operating under the names of Jackpot Video Games and The Donut Hole. The license numbers utilized at the location are as follows: 3805602, 3805603, 3805604, 3805605, and 3805607, located in the retail location known as the Jackpot Video Games, and 3805606, 3805608, 3930204, 3930206, and 3930207, located in the retail location known as the Donut Hole.

On October 3, 1997, SLED Agents conducted an inspection of the video game businesses at the Summerville address. 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.

At the date and time of inspection, both game rooms were open for business and each contained five operational Class III machines. An undercover SLED Agent played the machines in both rooms, with approximately twenty minutes spent in The Donut Hole and ten minutes spent in Jackpot Video Games. During the time of the inspection, two other people were playing the machines in one game room, with another three people playing the machines in the second game room. No employee was physically present in either game room, but a single employee was present in a commons area immediately in front of the game rooms. That employee, the assigned employee for Jackpot Video, was approximately five feet from the entrance to Jackpot Video. The assigned employee for the Donut Hole was not on the premises, having left earlier to go to the bank. Thus, at the time of the inspection of the two game rooms, no employee was present in either game room.

Two electric utility meters were employed in operating the game rooms with both meters operational on the date of the inspection. While conflicting testimony exist on this determination, the utility bills serve as the best proof of the functioning meters. Two meters exist and are designated as measuring usage for Suite-A and Suite-B, respectively. As of October 1, 1997, the utility bills show both meters were read and each produced a utility bill of $159.27 and $216.29, respectively. Accordingly, considering the evidence as a whole, the meters were still functioning on October 3, 1997.

As a result of the inspection, the SLED Agents issued a citation against Coastal and Mid-South for a violation of S.C. Code Ann. § 12-21-2804(A) and 27 S.C. Code Ann. Regs. 117-190 (Supp. 1997) for operating more than five machines in a single place or premise. Copies of the Violation Report were left with the employee on duty. In addition to revocation and a six month prohibition on the use of Class III machines, DOR also seeks a $5,000 fine against Coastal, as the owner and licensee of the machines, and a $5,000 fine against Mid-South, as the owner of the location.

3. Conclusions of Law

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

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. However, a definition is supplied by Regulation 117-190.

Regulation 117-190 concentrates its analysis of a single place or premise by examining the physical characteristics of the structure enclosing the Class III machines, and it 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 premise 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 at least four facts. Indeed, a failure to meet any one of these four factors results in the video game area not being a separate place or premise. The four factors are: (1) Does each entity or business have a separate electric utility meter? (2) Does each entity or business have at least one separate employee on the premises during business hours? (3) Does each entity or business have a separate local business license where required? (4) Does each entity or business have a separate state sales tax license?

B. Law Addressing Employee On the Premises

In the Findings of Fact, I have found that each entity, The Donut Hole and Jackpot Video, had a separate, functional, electric utility meter. Thus, no violation of the separate place or premises requirement results from the electric utility meter factor.

However, a second inquiry relates to the separate employee factor required by Regulation 117-190. The issue is whether each entity or business has at least one separate employee on the premises during business hours. Regs. 117-190. 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 employee's 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 allow 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 premise 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 cannot seek ways to rewrite statutes or regulations. To depart from the plainly expressed meaning causes the court 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. Indeed, 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. 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. Application of Law to Facts of Employee On the Premises

Here, Coastal holds several Class III video game machines and allows ten of those licenses to be used on ten machines in a mall-type structure containing two video game rooms located at 1111 Main Street, Summerville, South Carolina. On October 3, 1997, SLED Agents conducted an inspection of the video game businesses at the Summerville location. To prevail, DOR bears the burden of proving that the rooms were without separate employees on the premises. See 29 Am. Jur. 2d Evidence § 127 (1994) (burden of proof generally rests with the party who asserts the affirmative of an issue).

Under the facts of this case, DOR has meet that burden since neither of the two rooms had an employee on the premises. A violation of the separate place or premises requirement of section 12-21-2804(A) occurred on October 3, 1997 at the video game businesses located at 1111 Main Street, Summerville, South Carolina.

B. Revocation


1. Positions of Parties

Coastal argues that as a machine owner, it knew nothing of the employee violation. Thus, Coastal argues it cannot have its licenses revoked. DOR argues that since a violation of S.C. Code Ann. § 12-21-2804 has been established, a revocation of all machines at the location is required. DOR asserts the violation is not dependent upon scienter and that a lack of knowledge by Coastal is no defense.

2. Findings of Fact

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

A violation of the single place or premises requirement occurred at Mid-South's location on October 3, 1997. Of the ten machines found in violation, all are owned by Coastal and all are housed in the game rooms owned by Mid-South. Coastal has no management control of any employee working for Mid-South and Mid-South exercises day-to-day management control over employees at its two game rooms.

3. Conclusions of Law

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

A. Statutory Requirements for Revocation

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, the establishment does not meet the demands of the single place or premises requirement. Accordingly, the machine licenses located therein must be revoked.

B. Lack of Knowledge

Coastal's lack of knowledge of the employee arrangements is not a basis for denying the revocation. 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 Coastal did not know the employee left his post to go to the bank or that no employee was within the confines of the game rooms does not halt the imposition of the revocation of all ten licenses.(2) Thus, Coastal's licenses for the Class III machines identified as 3805602, 3805603, 3805604, 3805605, and 3805607, located in the retail location known as Jackpot Video Games, and 3805606, 3805608, 3930204, 3930206, and 3930207, located in the retail location known as The Donut Hole, must be revoked. S.C. Code Ann. § 12-21-2804(A)(Supp. 1997).

C. Six Month Prohibition


1. Positions of Parties

DOR asserts the 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. Coastal and Mid-South argue that if a revocation is applied, no six month penalty should be imposed on the location, but only on the machines in use at the time of the violation.

2. Findings of Fact

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

Coastal placed ten Class III machines in two game rooms known as Jackpot Video Games and The Donut Hole. At the time of the inspection on October 3, 1997, Mid-South operated the location housing Jackpot Video Games and The Donut Hole and held retail licenses issued by DOR pursuant to Chapter 36 of Title 12 of the S.C. Code. At the time of the inspection on October 3, 1997, the location was a licensed establishment.

Judicial notice is taken of the published decisions of the Administrative Law Judge Division and of the numerous instances in which DOR has argued before the Division that S.C. Code Ann. § 12-21-2804(A) imposes 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.

3. Conclusions of Law

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

A. Prohibition Applicable to Machines or to Location

1. 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. Mid-South'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 re-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 prohibition applies to the machines involved and not to the location involved.





2. 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 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 also 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 that the legislature imposed a six month prohibition on the machines and not on the location.

a. 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. Coastal's ten machines 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 prohibition.

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 that answers 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 that the machine is dead for six months and serves to give teeth to the revocation of the machine license.(3)

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 the issuance of licenses for those Class III machines that were in an establishment at the time a license for a machine in that establishment was revoked. No prohibition is imposed on the location itself.





b. 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."(4) 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 does not meet "the provisions of Article 19 of this chapter and the [corresponding] rules and regulations promulgated by [DOR]." Id. (5) 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 that the General Assembly was cognizant of the difference between a license for a machine and a license involving an establishment or location. In section 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 six month prohibition on re-licensing the affected machines, and further, that the symmetry is broken by the dead location view. 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.

c. Deference To Agency

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, DOR asserts compelling reasons must be established. In significant part, I disagree with DOR's analysis as it relates to the weight to be accorded that agency's interpretation of S.C. Code Ann. § 12-21-2804(A) (Supp. 1997).

i. 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 its 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.

ii. 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.

-- 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 the issuance of licenses for those Class III machines that were in an establishment at the time a license for a machine in that establishment was revoked. Thus, having found that the plain meaning of the statute establishes legislative intent, no deference to DOR's position is required.

-- 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 statutory 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 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 "great weight" to be accorded 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.

iii. 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.

D. Expired Licenses


1. Positions of Parties

Coastal argues that no six month prohibition can be imposed on seven of the machines since the six month prohibition is triggered only when a license is revoked. Coastal argues that seven licenses have already expired, and therefore, no revocation occurred as to them and thus no six month prohibition applies to those machines. DOR asserts the six month prohibition is not denied merely due to the expiration of a license. Rather, it argues the six month prohibition "attached" at the time the violation occurred.

2. Findings of Fact

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

The violation of S.C. Code Ann. § 12-21-2804 occurred on October 3, 1997. On that date all ten licenses for the ten machines in issue were unexpired. However, seven of Coastal's machine licenses expired on May 31, 1998 leaving three licenses still in operation at the time of the hearing in this case. These remaining three licenses will not expire until May 31, 1999.

3. Conclusions of Law

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

Coastal argues no six month prohibition can be imposed on the re-licensing of seven of its machines since the corresponding licenses expired prior to the final hearing in this case. Coastal reasons that the six month prohibition on the use of Class III machines cannot be imposed unless a revocation is first imposed and that an expired license cannot be revoked since nothing exists to revoke.

I disagree. The conduct for which DOR seeks license revocation occurred while the affected licenses were still in effect. All statutorily mandated consequences of such conduct attach regardless of the natural life of the license. To read the statute as suggested by Coastal renders the six month prohibition meaningless. If all that is required to avoid the six month prohibition is a showing that the license no longer exists (i.e. nothing remains to be revoked), one could easily avoid the six month period by merely turning in the license before the decision on the merits was adjudicated. This interpretation is inconsistent with the intent of the General Assembly. See Kiriakides v. United Artists Communications, 312 S.C. 271, 440 S.E.2d 364 (1994)(the courts will reject an interpretation that would lead to a result so plainly absurd that it could not possibly have been intended by the legislature or would defeat the plain legislative intention).

Here, the plain wording of the statute indicates that the General Assembly intended the six month prohibition to flow as a natural consequence of a proven violation and did not intend to create a prohibition so easily defeated as that suggested by Coastal.(6)

Accordingly, the expiration of the licenses on the seven machines owned by Coastal prevents neither the revocation of the licenses nor the imposition of a six month prohibition on the use of those machines.

E. Amount of Penalty


1. Positions of Parties

DOR asserts that a penalty of $5000 is due from Coastal, as the holder of the machine license, and $5,000 is due from Mid-South as the location owner. Both Mid-South and Coastal argue the penalty is too severe.

2. Findings of Fact

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

Prior to this adjudication, Mid-South and Coastal have violated section 12-21-2804(A) at least eight times. Even though these violations are under appeal, the number of disputes demonstrates both Coastal and Mid-South are well aware of the need for separate employees on the premises of each game room. In contradiction of the separate employee position, Mid-South's policy is that an employee must be assigned to a single game room but that employee need not be in the game room at all times. Consistent with the stated policy, at the time of inspection on October 3, 1997, no employee was present in the game room known as Jackpot Video Games nor in the game room known as The Donut Hole.

Coastal places the machines with Mid-South, Inc. and each share in the profits of the machines. Under this arrangement, management of the rooms in which the Class III machines are located is in Mid-South. However, actual maintenance and control of the Class III machines is in Coastal. In summary, as to the operation of the machines, Mid-South uses the game rooms for its retail business and Coastal uses the game rooms for its ownership of machines.

3. Conclusions of Law

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

A violation of section 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

Those persons to whom the five machine limit applies are those who either maintain a Class III machine for use or permit the use of a Class III machine on premises which they occupy. S.C. Code Ann. §§ 12-21-2720(A) and -2804(A) (Supp. 1997).

Here, Mid-South occupied Jackpot Video Games and The Donut Hole and permitted the use of the Class III machines in these game rooms. Further, Coastal is a person who maintains the Class III machines for play. Both Mid-South and Coastal benefit from the machine license; therefore, both are responsible for compliance with section 12-21-2804(A). Further, the separate employee requirement in Regulation 117-190 applies to both Mid-South, as the owner of the location, and Coastal, as the machine owner. See McNickel's Inc. v. South Carolina Dep't. of Revenue, Op. No. 24819 (S.C.Sup.Ct. filed July 20, 1998)(Shealy Adv.Sh. # 26 at 31, 36).

Both Mid-South and Coastal violated section 12-21-2804(A) and Regulation 117-190, and both are liable for a penalty.





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 Mid-South and Coastal have violated section 12-21-2804(A) at least eight times. Under all of the circumstances, a fine of $5,000 is appropriate for each party.

IV. Order


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

Coastal's ten licenses utilized at 1111 Main Street, Summerville, South Carolina are revoked. The ten machines in that location on the date of the violation, October 3, 1997, may not be relicensed for six months from the date of this order. However, the location is not affected by the revocation. Further, a fine of $5,000 each is imposed on Mid-South and on Coastal.

AND IT IS SO ORDERED.



______________________

RAY N. STEVENS

Administrative Law Judge

Dated: August 20, 1998

Columbia, South Carolina

1. The 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).

2. Notably, both Mid-South, Inc. and Coastal Coin, Inc. are owned by same individual, George Vinovich. Therefore, the lack of knowledge argument is somewhat disingenuous. My analysis, however, would not change if the machine licensee and the location licensee were owned by different individuals.

3. 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).

4. The additional license of Article 20 also applies to other entities; machine manufacturers, distributors, and operators must obtain the Article 20 license.

5. 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).

6. Other jurisdictions have also held that the expiration of a license does not moot the revocation of that license when revocation proceedings are timely commenced. See Alpern v. License Appeal Commission of City of Chicago, 38 Ill.App.3d 565, 348 N.E.2d 271 (1976); People v. Standard Accident Insurance Company, 17 A.D.2d 1, 230 N.Y.S.2d 145 (1962); Wallman v. New York State Athletic Commission, 20 Misc.2d 398, 194 N.Y.S.2d 213 (1959); Valley Lodge v. Pennsylvania Liquor Control Board, 163 Pa.Super. 395, 62 A.2d 68 (1948); Vitali v. Smith, 105 R.I. 760, 254 A.2d 766 (1969); see also 51 Am.Jur.2d License and Permits § 83 (1970).


Brown Bldg.

 

 

 

 

 

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