ORDERS:
FINAL ORDER AND DECISION
STATEMENT OF THE CASE
This matter comes before the Administrative Law Judge Division upon the Respondent's
request for a contested case hearing pursuant to S.C. Code Ann. §§ 12-60-450 (Supp. 1997) & 1-23-310 et seq. (1987 & Supp. 1997). The matter was initiated on August 12, 1997, when agents of the
South Carolina Law Enforcement Division ("SLED") issued a citation to the Respondent for
tendering cash payouts in excess of $125 in a twenty-four hour period in violation of S.C. Code
Ann. § 12-21-2791 (Supp. 1996).
After notice to the parties, a hearing was conducted on September 16, 1998. Any issues
raised or presented in the proceedings or hearing of this case not specifically addressed in this Order
are deemed denied. ALJD Rule 29(C).
STIPULATED FACTS
At the hearing, the parties presented as Petitioner's Exhibit 1 stipulated facts as follows:
- McDonald's Amusement, Inc. ("McDonald's") holds South Carolina retail/sales tax
license no. 046-219634.
- McDonald's holds Retail License No. 046-219634 for a location doing business as
"Broadway" at 3606 S.C. Hwy 51, Unit #1, Fort Mill, South Carolina ("licensed location").
- On August 12, 1997, the licensed location allowed the operation of coin-operated
machines pursuant to S.C. Code Ann. Section 12-21-2720(A)(3) (Supp. 1997).
- On August 12, 1997, South Carolina Law Enforcement Agent ("SLED") M.R. Jones
conducted an inspection at the licensed location.
- During the August 12, 1997 inspection, Agent Jones played a coin-operated machine
licensed pursuant to Section 12-21-2720(A)(3). Agent Jones inserted a twenty-dollar bill into the
machine and played the machine for a while. He noted the machine showed game credits of $140.
He pushed the payout button and received Ticket No. 00004186 for $125. He immediately pushed
the payout button a second time and received Ticket No. 00004187 for fifteen dollars from the
machine. Agent Jones gave both tickets to the licensed location's room attendant and was paid the
total cash amount of $140.
- On August 12, 1997, after receiving the $140 payout, Agent Jones issued a
Preliminary Findings Report for "Exceeding the $125 Payout," pursuant to S.C. Code Ann. § 12-21-2791 (Supp. 1997).
- On November 3, 1997, the Department, Office Services Division issued an
administrative violation based on the August 12, 1997 Preliminary Findings Report issued to the
licensed location by Agent Jones.
- By letter of December 3, 1997, the licensed location filed a written appeal of the
August 12, 1997 violation with the Department.
- On January 22, 1998, the Department issued the Final Department Determination
regarding the violation issued to the licensed location by Agent Jones on August 12, 1997.
- In the determination, the Department determined the licensed location had violated
the provisions of Section 12-21-2791, by exceeding the payout of $125 on August 12, 1997. In this
determination, the Department imposed a monetary penalty of $500 on the licensed location.
- Respondent requested a hearing on the determination and the matter was transmitted
to the Administrative Law Judge Division.
FINDINGS OF FACT
In addition to the Stipulated Facts, I make the following Findings of Fact, taking into
account the burden on the parties to establish their respective cases by a preponderance of the
evidence and taking into consideration the credibility of the witnesses:
12. DOR has interpreted Section 12-21-2791 to prohibit payouts in excess of $125 to
any person in a twenty-four hour period, regardless of how much cash the person initially deposited
into the machine, consistently since its enactment in 1993.
DISCUSSION
The primary issue for determination is whether the cash payout limit of S.C. Code Ann. §
12-21-2791 (Supp. 1996) applies only to winnings above the initial cash deposit into a Class III
video game machine. S.C. Code Ann. § 12-21-2791 (Supp. 1996) provides as follows:
Any location which operates or allows the operation of coin-operated machines
pursuant to Section 12-21-2720(A)(3) which provides payouts authorized pursuant
to Section 16-19-60 shall limit the cash payout for credits earned for free games to
two thousand five hundred credits per player per location during any twenty-four
hour period. The cash value of credits for each free game shall be limited to five
cents.
The South Carolina Department of Revenue (DOR) argues that the plain language of the statute
prohibits payouts in excess of $125 to any person in a twenty-four hour period, regardless of how
much cash the person initially deposited into the machine. The Respondent argues that the statute
imposes a limit on credits earned which refers to credits in excess of the credits received upon
depositing money in a machine; i.e. players may receive what they have put into the machine plus
$125.00.
A cardinal rule of statutory construction is that the words used in a statute are to be given
their plain and ordinary meaning. Multimedia, Inc. v. Greenville Airport Commission, 287 S.C.
521, 339 S.E.2d 884 (Ct. App. 1986); Hughes v. Edwards, 265 S.C. 529, 220 S.E.2d 231 (1975).
When the terms of a statute are plain and unambiguous, the courts must apply those terms according
to their literal meaning, without resort to subtle or forced construction in an attempt to limit or
expand the scope of the statute. Holley v. Mount Vernon Mills, Inc., 312 S.C. 320, 440 S.E.2d 373
(1994). "If a statute's language is unambiguous and conveys a clear and definite meaning, it is
unnecessary and inappropriate for the court to use rules of statutory interpretation to impose another
meaning." State v. Evans, 309 S.C. 471, 474, 424 S.E.2d 512, 514 (Ct. App. 1992). The provision
at issue is unambiguous. S.C. Code Ann. § 12-21-2791 limits cash payouts for "credits earned for
free games" to 2,500 credits (each worth up to five cents) per player per location. "Credits earned
for free games" refers to the games or credits available to a player without any additional cost to the
player. In other words, "credits earned" means "the credits the player has at the conclusion of play
regardless of whether they are due to money the player put in or credits later won. . . ." Johnson v.
Collins Entertainment Co., Inc., 3:97-2136-17 (D.S.C. August 25, 1998). These "credits" are the
same ones referred to in S.C. Code Ann. § 12-21-2772(5) (Supp. 1997):
"Machine" means an electronic video games machine that, upon insertion of cash,
is available to play or simulate the play of games as authorized by the commission
utilizing a video display and microprocessors in which the player may receive free
games or credits that can be redeemed for cash.
Free games or credits can be redeemed for cash and are available for play "without additional cost"
to the player. See Holliday v. Governor of State of South Carolina, 78 F.Supp. 918, 922
(W.D.S.C. 1948), aff'd, 335 U.S. 803 (1948).
The Respondent's assertion that the provision "clearly imposes a limit of $125.00 on credits
that are earned and not credits that are automatically received upon depositing coins in the
machine" is specious. In this instance, Agent Jones accumulated $140 worth of credits earned for
free games. Whether those credits were earned by playing the machine or from the initial deposit
of money, the games or credits were available to Agent Jones "without additional cost"; had he not
redeemed them, he could have continued playing the machine "without additional cost." See
Alexander Amusement Co. v. State, 246 S.C. 530, 144 S.E.2d 718, 719 (1965) (an undercover agent
"played the machines by depositing coins therein, accumulating a number of free games on each").
Alternatively, if the provision were ambiguous and did not convey a clear and definite
meaning, the rules of statutory interpretation would support DOR's interpretation. DOR
"guidelines" set forth in "A Guide to Conducting Video Gaming Establishments in South Carolina"
interprets S.C. Code Ann. § 12-21-2791 (Supp. 1996) to limit the cash payout on "credits remaining
on the machine" to $125 regardless of the "amount of credit originally purchased by the player."
Interpreting S.C. Code Ann. § 12-21-2791 (Supp. 1996) to apply only to winnings above the initial
cash deposit into a Class III video game machine would create an absurd and unworkable result.
See Johnson v. Collins Entertainment Co., Inc., 3:97-2136-17 (D.S.C. August 25, 1998) (discussion
of various interpretations allowing payout in excess of $125); 1994 Op. S.C. Att'y Gen. No. 56 at
123.
If the Legislature had intended the interpretation advanced by Respondents then the adoption
of language in the 1996-97 South Carolina state budget bill would not have been necessary. A
portion of the budget bill adopted, but later vetoed, read in part:
I. Section 12-21-2791 of the 1976 Code, as added by Act 164 of 1993, is amended to
read:
Section 12-21-2791. During a twenty-four hour period, a person is
not permitted to win more than one hundred twenty-five dollars over
and above the amount deposited in a coin-operated machine
authorized under Section 12-21-2720(A)(3).
1996 Budget Bill, Part II §54I. This provision clearly advances the position of Respondent. If the
current version of Section 12-21-2791 means a payout in excess of what is deposited into the
machine, then there would be no need for the Legislature to amend the statute. The Legislature is
presumed not to undertake a futile act. TNS Mills, Inc. v. S.C. Dept. of Revenue, 331 S.C. 611, 503
S.E.2d 471 (1998).
Based upon the reading of Section 12-21-2791, it is clear that Respondents violated the
statutory provisions by exceeding the maximum daily limit on payouts for credits on the Class III
video game machine. The penalty provisions are discussed in the Conclusions of Law.
CONCLUSIONS OF LAW
Based upon the Findings of Fact, I conclude as a matter of law the following:
Jurisdiction, Standard of Proof, and Burden of Proof
1. Pursuant to S.C. Code Ann. § 12-4-30(D) (Supp. 1997) and S.C. Code Ann. § 1-23-600 (Supp. 1997), the Administrative Law Judge Division has jurisdiction to hear and decide this
matter. See also South Carolina Administrative Procedures Act, §§ 1-23-310 et seq. (1986 & Supp.
1997) and South Carolina Revenue Procedures Act §§ 12-60-10 et seq. (Supp. 1997).
2. This tribunal has personal jurisdiction over the parties.
3. Video poker machines authorized under S.C. Code § 12-21-2720(A)(3) (Supp. 1997)
are known as "Class III" video game machines.
4. The licensing, placement, and operation of video poker machines is subject to Title
12, Chapter 21, Articles 19, 20, and 21 of the S.C. Code, as amended.
5. Licenses issued by the State are not rights or property, but are rather privileges
granted in the exercise of the police power of the State to be used and enjoyed only so long as the
restrictions and conditions governing them are complied with. The tribunal authorized to grant the
issuance of a license is also authorized, for cause, to revoke or deny it. Feldman v. South Carolina
Tax Commission, 203 S.C. 49, 26 S.E.2d 22 (1943).
6. In video poker license violation cases, DOR bears the burden of proving its case by
a preponderance of evidence. See National Health Corp. v. South Carolina Dep't of Health and
Envtl. Control, 298 S.C. 373, 380 S.E.2d 841 (Ct. App. 1989); 29 Am. Jur 2d Evidence § 127
(1994); Sanders, Neese, and Nichols, South Carolina Trial Handbook, § 9:3 (1994).
Statutory Construction
7. "If a statute's language is unambiguous and conveys a clear and definite meaning,
it is unnecessary and inappropriate for the court to use rules of statutory interpretation to impose
another meaning." State v. Evans, 309 S.C. 471, 474, 424 S.E.2d 512, 514 (Ct. App. 1992). In
other words, "where a statute is complete, plain and unambiguous, legislative intent must be
determined from the language of the statute itself." Whitner v. State, 328 S.C. 1, 492 S.E.2d 777,
779 (1997), cert. denied, 118 S.Ct. 1857 (1998).
8. "Legislative enactments are to be construed as written. . . ." Timmons v. South
Carolina Tricentennial Comm'n, 254 S.C. 378, 402, 175 S.E.2d 805, 817 (1970), cert. denied, 400
U.S. 986 (1971).
9. "The Plain Meaning Rule defies application of rules of statutory interpretation."
Bauer v. State, 267 S.C. 224, 234, 227 S.E.2d 195, 198 (1976).
10. The construction of a statute by an agency charged with its administration is entitled
to the most respectful consideration and should not be overruled absent compelling reasons. Faile
v. South Carolina Employment Security Comm'n, 267 S.C. 536, 230 S.E.2d 219 (1976).
11. As DOR has interpreted S.C. Code Ann. § 12-21-2791 (Supp. 1996) to include
credits for cash deposits into a Class III video game machine, without any compelling reason to do
otherwise, that interpretation should not be overruled.
12. In construing a statutory provision, where a particular construction would create an
absurd result, another reasonable construction effectuating legislative intent should prevail.
Kiriakides v. United Artists Communications Inc., 312 S.C. 271, 440 S.E.2d 364 (1994).
13. Interpreting S.C. Code Ann. § 12-21-2791 (Supp. 1996) to apply only to winnings
above the initial cash deposit into a Class III video game machine would create an absurd and
unworkable result. See Johnson v. Collins Entertainment Co., Inc., 3:97-2136-17 (D.S.C. August
25, 1998).
14. "[T]he legislature's intent in enacting [Section 12-21-2791] is to prevent excessive
gambling by limiting such cash payouts." Justice v. The Pantry, 330 S.C. 37, 45, 496 S.E.2d 871,
875 (Ct. App. 1998), reh'g denied March 19, 1998.
15. Construing the S.C. Code Ann. § 12-21-2791 (Supp. 1996) payout limitation to
apply only to credits in excess of those purchased by a player does not support the purpose of the
provision.
Effect of S.C. Code Ann. § 12-21-2791
16. On August 12, 1997, S.C. Code Ann. § 12-21-2791 (Supp. 1996) provided as
follows:
Any location which operates or allows the operation of coin-operated machines
pursuant to Section 12-21-2720(A)(3) which provides payouts authorized pursuant
to Section 16-19-60 shall limit the cash payout for credits earned for free games to
two thousand five hundred credits per player per location during any twenty-four
hour period. The cash value of credits for each free game shall be limited to five
cents.
17. S.C. Code Ann. § 12-21-2791 (Supp. 1996) uses "credits earned" to mean "the
credits the player has at the conclusion of play regardless of whether they are due to money the
player put in or credits later won. . . ." Johnson v. Collins Entertainment Co., Inc., 3:97-2136-17
(D.S.C. August 25, 1998).
18. "Credits earned for free games" is equivalent to "free games or credits that can be
redeemed for cash."
19. S.C. Code Ann. § 12-21-2772(5) (Supp. 1997) provides as follows:
"Machine" means an electronic video games machine that, upon insertion of cash,
is available to play or simulate the play of games as authorized by the commission
utilizing a video display and microprocessors in which the player may receive free
games or credits that can be redeemed for cash.
20. Free games are those available "without additional cost" to the player. See Holliday
v. Governor of State of South Carolina, 78 F. Supp. 918, 922 (W.D.S.C. 1948), aff'd, 335 U.S. 803
(1948); Alexander Amusement Co. v. State, 246 S.C. 530, 144 S.E.2d 718, 719 (1965) (an
undercover agent "played the machines by depositing coins therein, accumulating a number of free
games on each").
21. The Respondent violated S.C. Code Ann. § 12-21-2791 (Supp. 1996) by tendering
cash payouts exceeding $125 in a twenty-four hour period on August 12, 1997.
Penalty
22. Section 12-54-40(b)(3) (Supp. 1997) provides:
A person who is liable to obtain a license or purchase stamps for identification
purposes, who fails to obtain or display the license properly, or who fails to affix the
stamps properly, or fails to comply with statutory provisions, is subject to a penalty
of not less than fifty dollars nor more than five hundred dollars for each failure. For
failure to obtain or display a license as prescribed in Sections 12-21-2720 and 12-21-2730, the penalty is fifty dollars for each failure to comply.
23. No coin-operated machine licensed under the provisions of Section 12-21-2720(A)(3) may be operated at a location unless the location is licensed pursuant to the provisions
of Chapter 36 of Title 12. S.C. Code Ann. § 12-21-2703 (Supp. 1997).
24. As the Respondent was required to obtain a retail license to allow or operate Class
III machines on the licensed premises, the penalty provisions of S.C. Code Ann. § 12-21-2703
(Supp. 1997) apply to the violation at issue.
25. A penalty of $500 is appropriate under the facts and circumstances of this case.
ORDER
Based upon the foregoing Findings of Fact and Conclusions of Law, it is hereby
ORDERED, that McDonald Amusements, Inc. pay a $500 penalty to the South Carolina
Department of Revenue for tendering cash payouts exceeding $125 in a twenty-four hour period in
violation of S.C. Code Ann. § 12-21-2791 (Supp. 1996).
AND IT IS SO ORDERED.
__________________________________
ALISON RENEE LEE
Administrative Law Judge
November 13, 1998
Columbia, South Carolina |