SC Administrative Law Court Decisions

This matter comes before me pursuant to the Administrative Procedures Act, S.C. Code Ann. § 1-23-310 et seq. (1986 and Supp. 1997), upon a request for a contested case hearing by Collins Entertainment Corporation ("Collins") subsequent to the issuance by Petitioner, South Carolina Department of Revenue ("DOR") of citations for failing to attach owner identification to two video poker machines, in violation of S.C. Code Ann. § 12-21-2748 (Supp. 1997). DOR seeks a total fine of $5,000 for the violations, pursuant to S.C. Code Ann. § 12-21-2738 (Supp. 1997). Collins admits the violations occurred, but argues that the fines should be reduced in consideration of mitigating circumstances.

A contested case hearing was held at the Administrative Law Judge Division in Columbia on September 22, 1998. Based upon the relevant and probative evidence and the applicable law, a total fine of $2,000 is imposed for two violations of S.C. Code Ann. § 12-21-2748, pursuant to S.C. Code Ann. § 12-21-2738 (Supp. 1997).

MOTION TO DISMISS

DOR moved to dismiss Collins's request for a contested case hearing, alleging Collins failed to timely file a written hearing request with DOR. The Revenue Procedures Act requires that a party request a contested case hearing within thirty days after DOR's determination is sent by first class mail or delivery to the taxpayer. S.C. Code Ann. § 12-60-470(F) (Supp. 1997). "Department determination" means the final determination within DOR from which an individual can request a contested case hearing before the Administrative Law Judge Division. S.C. Code Ann. § 12-60-30(10) (Supp. 1997). The determination was received by Collins on October 21, 1997; therefore, Collins had until November 20, 1997 to request a hearing. See Rule 6(a), SCRCP. Collins claims a request for a contested case hearing, dated November 4, 1997, was hand delivered to DOR, and provided a copy of an undated, unstamped request addressed to DOR. DOR counsel claims to have never received the request. Further, while DOR concedes that Collins routinely, and as matter of practice, requests a hearing when cited by DOR for alleged video poker violations, the agency asserts that Collins's practice in previous and subsequent cases is to send such requests via certified mail rather than by hand delivery.

As the movant, DOR carries the burden to produce evidence that the Respondent did not file a request for a contested case hearing until after November 20, 1997. In civil cases the standard for a motion to dismiss is to view all the evidence and any reasonable inferences to be drawn therefrom in the light most favorable to the non-moving party. W.E. Gilbert & Assocs. v. S.C. Nat'l Bank, 285 S.C. 421, 330 S.E.2d 307 (Ct. App. 1985). The evidence, in the light most favorable to Collins, does not prove that Collins's request was not hand delivered to DOR in a timely manner. DOR established only that Collins's request was not received by counsel; however, no evidence concerning DOR procedures in accepting hand-delivered pleadings was offered. DOR introduced several letters to support its proposition that the practice of the Respondent has been to conduct correspondence via certified mail rather than by hand delivery; however, two of the items submitted by DOR were marked "HAND DELIVERY." (Letter from Winslow to Brown of August 27, 1997; Letter from Winslow to Brown of August 11, 1997).

Additionally, the machines in issue in this case were located at a business known as Treasure Island, in North Myrtle Beach, and the inspection which resulted in the citations being issued occurred on October 23, 1996. Another video poker location doing business in North Myrtle Beach known as Treasure Island, at which Collins also had licensed machines in operation, was also inspected and cited with alleged violations on October 23, 1996. In filing requests for contested case hearings, it is reasonably possible that Collins and/or DOR were confused over which cases involved which location. It is undisputed that Collins timely filed a hearing request in the "other" case.

Certainly, the better practice would have been for Collins to document the filing of its request; however, due to the confusion and the possibility of lost documents, as well as considerations of fairness, the motion to dismiss is denied.

By a preponderance of the evidence, I find:

1. On September 23, 1996 Collins Entertainment Corporation ("Collins") applied for biennial coin-operated device license numbers 033694 and 3810667, which were affixed to video poker machines it owned ("subject machines").
2. On October 23, 1996, the subject machines were being operated at 1500 Bellamy Plaza, Suite 3, North Myrtle Beach, South Carolina, within one of the game rooms, known as "Treasure Island Video I."
3. On October 23, 1996, agents of the State Law Enforcement Division (SLED) inspected the location at 1500 Bellamy Plaza, Suite 3, North Myrtle Beach, South Carolina for compliance with the Video Game Machine Act.
4. On October 23, 1996, the subject machines were in operation without owner identification labels attached to either of them.
5. The SLED agents were able to determine that Collins Entertainment Corporation was the owner and licensee of the two machines.
6. As a result of the October 23, 1996 inspection, on June 19, 1997, Collins was cited by DOR with an administrative violation of S.C. Code Ann. § 12-21-2748 for failure to attach owner identification to the subject machines.
7. On October 16, 1997, DOR issued a final determination upholding its June 19, 1997 citation against Collins.
8. Collins has been cited for several alleged violations for failure to have owner identification labels on Class III video poker machines, but most of those citations were issued subsequent to the October 23, 1996 inspection and June 19, 1997 citation.
9. It is common for patrons of video gaming businesses to tamper with or remove owner identification stickers on machines owned by Collins and other machine owners.

1. As a result of patrons removing owner identification labels and DOR issuing citations based upon SLED inspections, Collins now places plexiglass covers over all owner identification labels affixed to its Class III machines, including the subject machines.

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

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.
2. Video poker machines authorized under S.C. Code § 12-21-2720(A)(3) (Supp. 1997) are termed Class III machines.
3. The licensing, placement, and operation of video poker machines is subject to the mandates of Title 12, Chapter 21, Articles 19, 20, and 21 of the S.C. Code, as amended.
4. 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 Comm'n, 203 S.C. 49, 26 S.E.2d 22 (1943).
5. 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 Dept. of Health and Environmental Control, 298 S.C. 373, 380 S.E.2d 841 (Ct. App. 1989).
6. Licensed Class III video poker machines must have information identifying the owner or operator of the machine attached on an area of the machine visible for inspection purposes. S.C. Code Ann. § 12-21-2748 (Supp. 1997).
7. On October 23, 1996, Collins failed to have attached owner identification to two video poker machines at 1500 Bellamy Plaza, Suite 3, North Myrtle Beach, South Carolina, in violation of S.C. Code Ann. § 12-21-2748 (Supp. 1997).
8. S.C. Code Ann § 12-21-2738 provides the penalty for a violation of S.C. Code Ann. § 12-21-2748 (Supp. 1997).

1. Prior to June 6, 1997, S.C. Code Ann. § 12-21-2748 (Supp. 1997) provided as follows:

A person who fails, neglects, or refuses to comply with the terms and provisions of this article or who fails to attach the require 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 department.

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.

1. Section 8A of Act 53 of 1997 removed the phrase "no part of which may be suspended" from Section 12-21-2738, effective June 6, 1997.
2. 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); therefore, it is presumed that with the enactment of Section 8A of Act 53 of 1997, the legislature intended to allow a portion of the $2,500 penalty provided for in Section 12-21-2738 to be suspended.
3. A fine of $1,000 per violation, for a total penalty of $2,000, is appropriate and reasonable in this matter, in light of the mitigating factors cited in the above Findings of Facts.
4. 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).

IT IS THEREFORE ORDERED that Collins Entertainment Corporation pay a penalty of Two Thousand Dollars ($2,000) for its October 23, 1996, violations of S.C. Code Ann. § 12-21-2748 (Supp. 1997) regarding machines bearing license numbers 033694 and 3810667.

AND IT IS SO ORDERED.

__________________________________

STEPHEN P. BATES

ADMINISTRATIVE LAW JUDGE

October 23, 1998

Columbia, South Carolina