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Administrative Law Court
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SC Administrative Law Court Decisions

SCDOR vs. Collins Entertainment Corp.

South Carolina Department of Revenue

South Carolina Department of Revenue

Collins Entertainment Corp.

For the Petitioner: Jeffrey M. Nelson, Esquire

For the Respondent: James H. Harrison, Esquire



Statement of the Case

This matter comes before me pursuant to S.C. Code Ann. §§ 1-23-310 et seq. (1986 and Supp. 1997) and 1-23-600 (Supp. 1997), upon request for a contested case hearing by Collins Entertainment Corporation ("Respondent"). Respondent was cited with an administrative violation of S.C. Code Ann. Section 12-21-2748 (Supp. 1997) for allegedly failing to affix owner/operator identification to a machine licensed pursuant to S.C. Code Ann. § 12-21-2720(A)(3)(Supp. 1997) (commonly referred to as "Class III" machines). The South Carolina Department of Revenue ("Department") seeks an order from this court finding the alleged violation on August 20, 1997, at Piedmont Petroleum Corp.# 12, 433 North Pleasantburg Drive, Greenville, South Carolina 29615. Further, the Department seeks a penalty of $2,500.00 for this violation.

The Respondent argues the identification was attached to its Class III machine; however, it argues that if the sticker was removed, someone else removed it, and as such, no penalty should be imposed. In the alternative, the Respondent argues that the penalty provision cited by the Petitioner as controlling here, S.C. Code Ann. § 12-21-2738 (Supp. 1997) has been amended to allow discretion as to the penalty imposed for such violations. Accordingly, it argues that if a violation is found here, mitigating circumstances require that a minimum penalty should be imposed.

After timely notice to the parties, a contested case hearing was held at the offices of the Administrative Law Judge Division in Columbia, South Carolina on June 1, 1998.

After a thorough review of the record and of the testimony and evidence presented at the hearing, I conclude that the Respondent violated the provisions of S.C. Code Ann. § 12-21-2748 and find that a penalty in the amount of Five Hundred ($500.00) Dollars is appropriate under the circumstances.


Without objection, Petitioner placed into evidence three exhibits which consisted of the State Law Enforcement Division Report ("SLED"), the Biennial Coin-Operated Device Application, and the Department's Final Determination letter.

Findings of Fact

Having carefully considered all testimony and arguments presented at the hearing and taking into account the credibility of the witnesses, accuracy of the evidence and reviewing all of the exhibits carefully, I make the following findings by a preponderance of the evidence:

1. Notice of the date, time, place and nature of the hearing was timely given to both parties.

2. Respondent is the owner of Class III machines and licenses in the State of South Carolina. On August 20, 1997, Respondent had four Class III machines at a location in Greenville County, South Carolina known as Piedmont Petroleum Corp. # 12, 433 North Pleasantburg Drive, Greenville, South Carolina 29615. One of the video gaming machines had license # 3803568 with an expiration date in 1998.

3. On August 20, 1997 at approximately 11:40 a.m., SLED agents James R. Causey and Lt. Don Evatt, both of whom are assigned to the Alcohol Enforcement section of SLED, conducted an inspection at this location. Both agents observed that the Class III machine with license No. 3803568 did not have an owner/operator identification attached to the machine. The entire machine was thoroughly examined by both agents and the store manager, Barbara Richardson. Such inspection revealed there was no identification affixed to the machine.

4. Agent Causey wrote up a Preliminary Findings Report dated August 20, 1997 and left a copy with the store manager, Barbara Richardson.

5. Respondent is the licensee of many video gaming machines within the State of South Carolina. Respondent has always purchased and obtained from the Department the owner/identification stickers and placed them on the machines. However, customers have historically torn them off while playing the machines. Over the last six months to a year, the Respondent has engaged in the process of affixing the owner/operator identifications within a plastic case on the side of the machines. As agent Causey testified to, they are encased in a plexiglass covering and are mounted to the machines with screws. As a result, they can not be removed by customers (except with great effort) nor can water or other liquid deface them.

6. Agent Causey testified that he knows of no violations having been written against any machines licensed to the Respondent within the last four months. Further, he stated that in all his video gaming machine investigations during the last six months, he has observed that all the machines licensed to Respondent by the Department have had the owner/identification stickers, encased in plexiglass and mounted with screws, affixed to them.

7. Each video gaming machine owned by Respondent has the name of Respondent flashing across its screen when it is turned on and is operational.

Conclusions of Law

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

1. The Administrative Law Judge Division has jurisdiction to hear this matter pursuant to S. C. Code Ann. § 12-4-30 (D) (Supp. 1997) and S. C. Code Ann. § 1-23-320 (Supp. 1997).

2. The licensing of Class III video games is governed by the provisions of Articles 19 and 20, Chapter 21, Title 12, South Carolina Code of Laws. Section 12-21-2720 (A)(3)(Supp. 1997) provides:

(A) Every person who maintains for use or permits the use of, on a place or premises occupied by him, one or more of the following machines or devices shall apply for and procure from the South Carolina Department of Revenue and Taxation a license effective for two years for the privilege of making use of the machine in South Carolina and shall pay for the license a tax of fifty dollars for each machine in item (1), two hundred dollars for each machine in item (2), and three thousand dollars for each machine in item (3), a machine of the nonpayout type, in-line-pin game, or video game with free play feature operated by a slot in which is deposited a coin or thing of value except machines of the nonpayout pin table type with levers or "flippers" operated by the player by which the course of the balls may be altered or changed....

The specific words of this statute require that a license be obtained for the legal operation of a Class III video gaming machine.

3. S. C. Code Ann. § 12-21-2748 (Supp. 1997) provides:

Any person who owns or operates devices described in Sections 12-21-2720 and 12-21-2730 must have attached to the machine information identifying the owner or operator of the machine. The identification must be placed on an area of the machine which is visible for inspection purposes. This identification is a condition precedent before the machines may be operated on location. Failure to comply with this requirement subjects the violator to the penalty and enforcement provisions of this chapter and of Chapter 54 as applicable.

4. S. C. Code Ann. § 12-21-2738 (Supp. 1996), as amended by Act No. 164, effective July 1, 1993 (which added the second paragraph), provided:

A person who fails, neglects, or refuses to comply with the terms and provisions of this article or who fails to attach the required license to any machine, apparatus, billiard, or pocket billiard table, as herein required, is subject to a penalty of fifty dollars for each failure, and the penalty must be assessed and collected by the commission. If the violation under this section relates to a machine licensed pursuant to Section 12-21-2720(A)(3), the applicable penalty amount is two thousand five hundred dollars, no part of which may be suspended, and one-half of this penalty must be deposited to the credit of the general fund of the State and one-half must be retained by or forwarded to the law enforcement or administrative agency charging the violation.

5. Section 8A of Act 53 of 1997 amended Section 12-21-2738, effective June 6, 1997. The amendment removed the phrase no part of which may be suspended from the second paragraph of the statute. By removing the phrase "no part of which may be suspended" from the statute, the General Assembly obviously intended that a mandatory penalty of $2,500 no longer be applicable. It is presumed that the legislature intended to accomplish something with a statute rather than to engage in a futile exercise. Berkebile v. Outen, 311 S.C. 50, 53-54, 426 S.E.2d 760, 762 (1993).

6. Where a statute is clear and unambiguous, there is no room for construction and the terms of the statute must be given their literal meaning. Southeastern Fire Ins. Co. v South Carolina Tax Comm'n, 253 S.C. 407, 171 S.E.2d 355 (1969); Green v. Zimmerman, 269 S.C. 535, 238 S.E.2d 323 (1977).

7. It is impossible for reasonable minds to differ as to the proper interpretation of S.C. Code Ann. § 12-21-2748 (Supp. 1997). That statute requires in unambiguous language that "owner/operator identification" be placed on the Class III machine "visible for inspection purposes." After a thorough examination of the evidence presented concerning the Class III machine at issue here, evaluating the credibility of the witnesses, I find and conclude that Respondent failed to have owner/operator identification on the machine bearing license # 3803568 on August 20, 1997 at the time of the inspection by the SLED agents.

8. The Department seeks a penalty of Two Thousand Five Hundred ($2,500.00) Dollars for this violation. Here, the violation occurred after June 6, 1997 and thus there is no requirement that this court impose the full penalty amount of Two Thousand Five Hundred ($2,500.00) Dollars. 9. It is a generally recognized principle of administrative law that the fact finder has the authority to impose an administrative penalty after the parties have had an opportunity to have a hearing and be heard on the issues. See Ohio Real Estate Comm'n v. Aqua Sun Investments, 655 N. E. 2d 266 (Ohio A. 2 Dist. 1995); Shadow Lake of Noel, Inc. v. Supervisor of Liquor Control, 893 S.W.2d 835 (Mo. App. S. D. 1995); Matter of Henry Youth Hockey Ass'n., 511 N.W.2d 452 (Minn. App. 1994); Vermont Agency of Natural Resources v. Duranleau, 617 A.2d 143 (Vt. 1992); City of Lousiville v. Milligan, 798 S.W.2d 454 (Ky. 1990); Com., Dept. of Transp. v. Slipp, 550 A. 2d 838 (Pa. 1988); Dept. of Transp. v. Miller, 528 A. 2d 1030 (Pa. 1987); State Police v. Cantina Gloria's, 639 A. 2d 14 (Pa. 1994).

10. Prior to governmental restructuring, the South Carolina Tax Commission (now the South Carolina Department of Revenue), sitting in its adjudicatory capacity, imposed penalties for violations of statutory provisions its agency administered. In its capacity as the fact-finder, the Commission would conduct an adjudicatory hearing in all contested cases arising under Title 12 of the South Carolina Code, and would render an order containing findings of fact and conclusions of law. As the fact-finder, it was the Commission's prerogative "to impose the appropriate penalty based on the facts presented." Walker v. South Carolina ABC Comm'n, 305 S.C. 209, 407 S.E.2d 633, 634 (1991). With the advent of restructuring, the abolition of the Tax Commission and the creation of the Department of Revenue headed by a single director, the Administrative Law Judge Division was given the authority to hear "all contested cases, as defined by Section 1-23-610 and as previously considered by the three [former Tax] commissioners..." S. C. Code Ann. § 12-4-30 (D) (Supp. 1997). The Administrative Law Judge Division consists of six Administrative Law Judges, each of whom, sitting as the fact-finder, must also impose a penalty based on the facts as presented in the contested case before him. As parties are entitled to present evidence on all issues arising out of the contested agency action, it follows that the tribunal responsible for conducting the contested case proceedings as mandated by the legislature must have the authority to decide the issues based on the facts presented and make the final decisions on all the issues, including the appropriate penalty.

11. The Video Game Machines Act which regulates video game machine activity in South Carolina, was enacted in 1993 and became effective on July 1, 1993. The Act is codified at S. C. Code Ann. § 12-21-2770, et seq. (Supp. 1997). The expressed purpose of the Act is to regulate the video game machine industry in South Carolina and to prevent large scale casino-type gambling

operations in this state. See Reyelt v. S. C. Tax Comm'n, 6:93-1491-3 and 6:93-1493-3 (U. S. Dist. Court, Greenville, S. C., Nov. 15, 1993); see also 1994 Op. Atty. Gen. No. 94-21 at 51.

12. In this case, the Respondent has obviously failed to comply with the literal mandate of Section 12-21-2748 in that it failed to have the owner/operator identification attached in the form of a sticker on the exterior of the machine. However, the three other machines at the location were also owned by Respondent and each of them had the owner/operator identification attached. Further, Respondent has its name broadcast on the screen of all of its machines to any and everyone who either operates them or observes them.

Thus, there is no evidence in this record that Respondent was in any way concealing its ownership of this machine or avoiding compliance with the statutes and regulations applicable to video gaming machines in the State of South Carolina. In fact, it is even more obvious that Respondent wanted all to know that it was the owner of the machine.

13. To levy a penalty in the amount of Two Thousand Five Hundred ($2,500.00) Dollars against Respondent in this case would be unjustifiable and unreasonable. Such a penalty would unduly penalize the Respondent despite its diligent efforts to comply with the applicable law, and would constitute a punishment far out of proportion to the nature of this violation. It became obvious to the SLED agents immediately during the investigation that Respondent was the owner of the machine.

14. Further, there is no evidence that an order requiring the Respondent to pay a fine in the amount requested by the Department would in any way assist this state in preventing large scale casino-type gambling operations. The Respondent has complied with the spirit of the law and has made exemplary efforts to comply with the literal requirements of this statute. The intention of the legislature was to require owner/operators to display their identification. Such was done in this case, albeit not by a sticker when the investigation occurred.

15. Accordingly, based upon the evidence submitted to this court and after considering the efforts by Respondent to comply both with the spirit and literal requirements of Section 12-21-2748, I conclude that an appropriate fine for this violation is Five Hundred ($500.00) Dollars.


Based on the foregoing Findings of Fact and the Conclusions of Law, it is hereby:

ORDERED that Respondent shall pay a fine to the Department in the amount of Five Hundred ($500.00) Dollars for the violation of S.C. Code Ann. Section 12-21-2748 (Supp. 1996) on August 20, 1997.


Marvin F. Kittrell

Chief Judge

June 2, 1998

Columbia, South Carolina

Brown Bldg.






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