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. Video Gaming Consultants, Inc. and Coastal Coin, Inc.

AGENCY:
South Carolina Department of Revenue

PARTIES:
Petitioners:
South Carolina Department of Revenue

Respondents:
Video Gaming Consultants, Inc. and Coastal Coin, Inc.
 
DOCKET NUMBER:
98-ALJ-17-0364-CC

APPEARANCES:
Jeffrey M. Nelson
Attorney for Petitioner

H. Buck Cutts
Attorney for Respondents
 

ORDERS:

FINAL ORDER AND DECISION

STATEMENT OF THE CASE

This matter is before this tribunal for a contested case hearing pursuant to S.C. Code Ann. §§ 1-23-310 et seq. (Supp. 1997) and S.C. Code Ann. § 12-4-30(D) (Supp. 1997) on alleged administrative violations. The South Carolina Department of Revenue alleges that on October 1, 1997, Respondents violated S.C. Code Ann. § 12-21-2804(A) by applying for, receiving, maintaining, or permitting to be used permits for the operation of more than five machines authorized under S.C. Code Ann. § 12-21-2720(A)(3) (Supp. 1997) at a single place or premises. Specifically, the Department alleges violations of the "one separate employee" requirement of 27 S.C. Code Ann. Regs. 117-190 (Supp. 1997). Additionally, the Department alleges that Respondent Video Gaming Consultants, Inc. violated S.C. Code Ann. § 12-21-2804(B) by improperly advertising for the playing of video poker machines.

For the alleged violations of § 12-21-2804(A), the Department seeks a $10,000 fine against each Respondent, revocation of licenses for eight Class III video game machines located in Game Room 2 and Game Room 3 on October 1, 1997, and preclusion of the use of any Class III video game machine licenses at these businesses for six months. The Department also seeks a $2,000 fine against Video Gaming Consultants, Inc. for the alleged violation of § 12-21-2804(B).

The hearing of this matter was held on September 3, 1998. The issues before this tribunal are (1) whether Respondents violated S.C. Code Ann. § 12-21-2804(A) and 27 S.C. Code Ann. Regs. 117-190 (Supp. 1997), (2) whether Respondent Video Gaming Consultants, Inc. violated S.C. Code Ann. § 12-21-2804(B), and (3) if so, what are the proper penalties for the violations. Based upon the following Findings of Fact and Conclusions of Law, this tribunal concludes that Respondent Video Gaming Consultants, Inc. violated S.C. Code Ann. § 12-21-2804(A) and 27 S.C. Code Ann. Regs. 117-190 (Supp. 1997) by utilizing video game machine licenses in contravention of these laws. Consequently, the licenses shall be revoked. No video game machine licenses shall be utilized in Game Room 2 and Game Room 3 at 2751 Highway 17 South, Garden City, South Carolina for a period of six months from the date of revocation of the licenses. Further, the Department shall impose a fine of $2,500 against Video Gaming Consultants, Inc. for violation of S.C. Code Ann. § 12-21-2804(A). However, the Department did not present sufficient evidence to establish that Respondent Coastal Coin, Inc. violated § 12-21-2804 (A) or that Respondent Video Gaming Consultants, Inc. violated § 12-21-2804(B).

FINDINGS OF FACT

Having carefully considered all testimony and arguments presented at the hearing of this matter, and taking into account the credibility and accuracy of the evidence, I make the following Findings of Fact by a preponderance of the evidence:

  1. On October 1, 1997, the Department's agents, Stacey Snow and Phil Grimsley, conducted an inspection of the video gaming businesses located at 2751 Highway 17 South, Garden City, South Carolina. After completion of the inspection that day, the agents issued administrative citations against Respondents for violation of the "single place or premises" requirement of S.C. Code Ann. § 12-21-2804(A) (Supp. 1997) and 27 S.C. Code Ann. Regs. 117-190 (Supp. 1997) and for a violation of the advertising prohibition in S.C. Code Ann. § 12-21-2804(B).
  2. At the time of the inspection, the facts relating to the "single place or premises" requirement of § 12-21-2804(A) and Regs. 117-190 were as follows:
  3. The location at 2751 Highway 17 South, Garden City, South Carolina was a mall-type structure consisting of a bar and three separate rooms designated as Game Room 1, Game Room 2, and Game Room 3. Each of the rooms contained video gaming machines.
  4. The main entrance into the structure opened into a common area.
  5. Game Room 2 and Game Room 3 were open and contained operational Class III video game machines which were available for play. One of the agents went into Game Room 2 and began playing a Class III video gaming machine while the other agent did the same in Game Room 3. Both played the machines for approximately forty-five minutes during which time no employee was present in either of the rooms.
  6. Although there were employees in the common area, no employee was inside either of these two game rooms.
  7. On October 1, 1997, the following Class III licenses were affixed to the machines in Game Room 2 and Game Room 3, as designated on Petitioner's Exhibit # 1, and held by Coastal Coin, Inc.:
Business Entity License Number
Game Room 2 3805885
3805609
3930230
3805891
Game Room 3 3930228
3930229
3805884
3805883


  1. At the time of the inspection, Respondent Video Gaming Consultants, Inc. held the retail licenses for the above-referenced businesses.
  2. The Department seeks a $10,000 fine against each Respondent, revocation of eight Class III video game machine licenses referenced herein, and preclusion of the use of any Class III video game machine licenses at the two businesses for a period of six months from the date of revocation. Additionally, the Department seeks to impose a $2,000 fine on Video Gaming Consultants, Inc. for an alleged violation of S.C. Code Ann. § 12-21-2804(B).
  3. Respondent Video Gaming Consultants, Inc. made a motion for dismissal of the citation issued for the violation of the advertising prohibition in § 12-21-2804(B) on the basis that, upon the facts and law, the Department did not prove that Respondent violated § 12-21-2804(B).
  4. Respondents did not offer any testimonial evidence; however, they submitted two exhibits.
  5. A sign on a pole near the highway in front of the businesses said "Jackpot Video Games."
  6. The Department did not offer any evidence as to who erected or maintained the sign.


CONCLUSIONS OF LAW AND ANALYSIS

  1. Jurisdiction
  2. Pursuant to S.C. Code Ann. § 12-4-30(D) (Supp. 1997) and S.C. Code Ann. § 1-23-320 (Supp. 1997), the Administrative Law Judge Division has jurisdiction to hear this matter.
  3. Burden of Proof
  4. In civil cases, generally, the burden of proof rests upon the party who asserts the affirmative of an issue. 2 Am. Jur. 2d Administrative Law § 360 (1994); Alex Sanders, et al., South Carolina Trial Handbook § 9:3 Party With Burden, Civil Cases (1994). The Department is the party asserting the affirmative in this case; therefore, the Department must prove by a preponderance of the evidence that Respondents violated § 12-21-2804(A) and Regs. 117-190, by failing to have a separate employee in the businesses which are the subject of this case, and that Respondent Video Gaming Consultants, Inc. violated § 12-21-2804(B), by advertising for the playing of video poker machines. The preponderance of the evidence "is evidence which is of the greater weight or more convincing than the evidence which is offered in opposition to it. . . ." Black's Law Dictionary 1182 (6th ed. 1990). "The preponderance of the evidence means such evidence as, when considered and compared with that opposed to it, has more convincing force and produces in the mind the belief that what is sought to be proved is more likely true than not true." Sanders, supra, § 9:5 Quantum of Evidence in Civil Cases (1994), (citing Frazier v. Frazier, 228 S.C. 149, 89 S.E.2d 225 (1955)).
  5. The weight and credibility assigned to evidence presented at the hearing of a matter is within the province of the trier of fact. See South Carolina Cable Television Ass'n v. Southern Bell Tel. and Tel. Co., 308 S.C. 216, 417 S.E.2d 586 (1992). Furthermore, a trial judge, who observes a witness, is in the better position to judge the witness's demeanor and veracity and evaluate his testimony. See McAlister v. Patterson, 278 S.C. 481, 299 S.E.2d 322 (1982); Peay v. Peay, 260 S.C. 108, 194 S.E.2d 392 (1973); Mann v. Walker, 285 S.C. 194, 328 S.E.2d 659 (Ct. App. 1985); Marshall v. Marshall, 282 S.C. 534, 320 S.E.2d 44 (Ct. App. 1984).


  6. Single Place or Premises Violation
  7. 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. This Act is codified at S.C. Code Ann. §§ 12-21-2770, et seq. (Supp. 1997). The purpose of the Act is to regulate the video game machines industry and to prevent large-scale casino-type gambling operations in the State of South Carolina. See Reyelt v. South Carolina Tax Comm'n, Nos. 6:93-1491-3 and 6:93-1493-3 (D.S.C. Nov. 15, 1993); See also Op. Att'y Gen. 94-21 at 51 (1994).
  8. South Carolina Code Ann. § 12-21-2804(A) (Supp. 1997) provides:

No person shall apply for, receive, maintain, or permit to be used, and the commission shall not allow to be maintained, permits or licenses for the operation of more than eight machines authorized under Section 12-21-2720(A)(3) at a single place or premises for the period beginning July 1, 1993, and ending July 1, 1994. After July 1, 1994, the commission 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. . . .

(Emphasis added).

  1. On June 23, 1995, regulations were promulgated which further clarify the provisions of the Video Game Machines Act, and, as such, these regulations have the force and effect of law. See Young v. South Carolina Dep't of Highways and Pub. Trans., 287 S.C. 108, 336 S.E.2d 879 (1985); Faile v. South Carolina Employment Sec. Comm'n, 267 S.C. 536, 230 S.E.2d 219 (1976). Specifically, Regulation 117-190 was promulgated to clarify the meaning of the phrase "single place or premises" as set forth in § 12-21-2804(A). This regulation, effective June 23, 1995, provides in relevant part:

A "single place" or "premises" means a structure surrounded by exterior walls or firewalls consistent with the requirements of the applicable building code (or where no building code is applicable, a one hour rated firewall), provided such exterior walls and firewalls may not have any windows, doors or other openings leading to another area where video game machines are located.

If a structure surrounded by exterior walls has two or more areas where video game machines are located, each surrounded by exterior walls or firewalls as defined and required above, the Department must review all the facts and circumstances to determine if each area in reality constitutes a single place or premise for video game machines. In determining whether each entity is in fact a single place or premises, the Department of Revenue will consider the following factors:

(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?

A positive answer to these four questions is required for each area to be considered a "single place or premise" for purposes of the Video Game Machines Act.

27 S.C. Code Ann. Regs. 117-190 (Supp. 1997) (emphasis added). The Supreme Court of South Carolina held this regulation to be valid and a natural amplification of § 12-21-2804. McNickel's, Inc. v. South Carolina Department of Revenue, Op. No. 24819 (S.C.Sup.Ct. filed July 20, 1998) (Davis Adv.Sh. No. 26 at 31).

  1. It is well established that in interpreting a statute, the court's primary function is to ascertain the legislative intent. State v. Blackmon, 304 S.C. 270, 403 S.E.2d 660 (1991); First South Sav. Bank, Inc. v. Gold Coast Assocs., 301 S.C. 158, 390 S.E.2d 486 (Ct. App. 1990); State v. Harris, 268 S.C. 117, 232 S.E.2d 231 (1977). In ascertaining the intent of the legislature, a court should not focus on any single section or provision, but should consider the language of the statute as a whole. Creech v. South Carolina Pub. Serv. Auth., 200 S.C. 127, 20 S.E.2d 645 (1942). Furthermore, in construing statutes, the language used should be given its plain and ordinary meaning without resort to subtle or forced construction to limit or expand the statute's operation. Home Health Serv., Inc. v. South Carolina Tax Comm'n, 312 S.C. 324, 440 S.E.2d 375 (1994); Bryant v. City of Charleston, 295 S.C. 408, 368 S.E.2d 899 (1988). Where terms of a statute are clear and unambiguous, they must be applied according to their literal meaning. Medlock v. 1985 Ford F-150 Pick Up, 308 S.C. 68, 417 S.E.2d 85 (1992); Green v. Zimmerman, 269 S.C. 535, 238 S.E.2d 323 (1977). "[A] statute should be so construed that no word, clause, sentence, provision or part shall be rendered surplusage, or superfluous. . . ." 82 C.J.S. Statutes § 346 (1953); see also Savannah Bank & Trust Co. of Savannah v. Shuman, 250 S.C. 344, 157 S.E.2d 864 (1967). This tribunal has no legislative powers, and the justice or wisdom of statutes rests exclusively with the General Assembly. See Smith v. Wallace, 295 S.C. 448, 369 S.E.2d 657 (Ct. App. 1988).
  2. It should be emphasized that S.C. Code Ann. § 12-21-2804(A) (Supp. 1997) clearly precludes any person, not just the licensees, from applying for, receiving, maintaining, or permitting to be used permits for the operation of more than five Class III video game machines in a single place or premises. The term "person" is not defined in the Act, but its common and ordinary meaning clearly encompasses any individual or business entity, including the licensee or machine owner. See Black's Law Dictionary 1142 (6th ed. 1995). Further, § 12-21-2804(A) mandates that the Department revoke the licenses of machines located in an establishment that fails to meet the requirements of this section. Hence, § 12-21-2804(A) mandates revocation of the licenses so used, even if the licensee was not directly involved in applying for, receiving, maintaining, or permitting its licenses to be used in contravention of the statute. Such an interpretation is consistent with the plain language of the statute.
  3. There is sufficient evidence to establish that Respondent Video Gaming Consultants, Inc. permitted licenses to be used in contravention of § 12-21-2804(A), which prohibits the operation of more than five Class III video game machines within a single place or premises. However, the Department did not present sufficient evidence to establish that Respondent Coastal Coin, Inc. applied for, received, maintained, or permitted to be used permits for the operation of more than five machines authorized under § 12-21-2720(A)(3) at a single place or premises, in violation of § 12-21-2804(A) and Regs. 117-190.

Under § 12-21-2804(A), a license on a video game machine must be revoked by virtue of its misuse under the Act, whether the actual violator is the licensee, machine owner, or lessee. However, a monetary fine under § 12-21-2804(F) may be imposed only on the person who violates § 12-21-2804(A). When applying for a machine license, a licensee violates the statute if when he applies for a license, he knows it will be used for the operation of more than five machines at a single place or premises. The statute does not state, as the Department would like this tribunal to construe it, that a person who applies for a license which is subsequently used for the operation of more than five machines at a single place or premises without his knowledge is in violation of the statute. In the instant case, as the operator of the businesses, Respondent Video Gaming Consultants, Inc. unequivocally violated the video gaming statute by its day-to-day operation and maintenance of the businesses. The Department has not established, however, that Respondent Coastal Coin, Inc. violated the statute when applying for the licenses or that it knowingly allowed more than five of its machines to be used at a single place or premises.

  1. Whether an establishment is being operated as a "single place or premises" is determined by evaluating the facts against the standard set forth in Regulation 117-190. With respect to the "employee" requirement, Regulation 117-190 requires that each entity or business have at least one separate employee on the premises of that respective entity or business during business hours to comply with the "single place or premises" requirements of § 12-21-2804(A).

If a game room containing operational Class III video game machines is accessible to customers and no employee is present in that room, the room is being operated in violation of § 12-21-2804(A). An employee working in a common area or anywhere else outside the game room is not considered to be "on the premises" of the game room. See South Carolina Dep't of Revenue and Taxation v. Stacks, 95-ALJ-17-0742-CC (March 8, 1996). This application is consistent with the intent of the General Assembly to prevent large-scale casino type gambling. See Singletary v. South Carolina Dep't of Educ., 316 S.C. 153, 447 S.E.2d 231 (Ct. App. 1994), citing State v. Thrift, 312 S.C. 282, 440 S.E.2d 341 (1994) (legislative intent must prevail if it can be reasonably discovered and language of a statute must be construed in the light of the intended purpose of the statute).

  1. Respondent Video Gaming Consultants, Inc. failed to meet the "one separate employee" requirement set forth in Regulation 117-190 by failing to have an employee on the premises of Game Room 2 and Game Room 3. While employees were nearby, the employees were not in the respective rooms as required during business hours.
  2. Failure to comply with any portion of Regulation 117-190 constitutes a violation of the single place or premises requirements of S.C. Code Ann. § 12-21-2804(A) (Supp. 1997). Consequently, the eight Class III video game machine licenses designated herein are subject to revocation.
  3. Insufficient evidence was proffered by the Department to establish that Respondent Coastal Coin, Inc. applied for, received, maintained, or permitted to be used more than five Class III machine licenses at a single place or premises.
  4. Advertising
  5. At the completion of the Department's presentation of its case, Respondent Video Gaming Consultants, Inc. made a motion to dismiss the citation against it for violating § 12-21-2804(B), contending that the Department did not provide sufficient evidence to establish a violation. Rule 41(b), SCRCP, allows dismissal of a claim upon motion by the respondent after the completion of the petitioner's presentation of evidence, where the petitioner has not shown a right to relief. Therefore, this tribunal considered only the evidence in the record at the point Respondent made its motion. See Rule 41(b), SCRCP.

Section 12-21-2804(B) provides:

No person who maintains a place or premises for the operation of machines licensed under Section 12-21-2720(A)(3) may advertise in any manner for the playing of the machines nor may a person offer or allow to be offered any special inducement to a person for the playing of machines permitted under Section 12-21-2720(A)(3).

(Emphasis added). To clarify and simplify the provisions of this statute, the Department promulgated Regulation 117-190.2 which defines the word "advertise." As it relates to advertising, the regulation provides that ". . . any attempt to call attention to, or make known, to the general public that video game machines as defined in Code Section 12-21-2772(5) are available for play is advertising and is strictly prohibited by the statute."

Section 12-21-2804(B) clearly provides that a person who maintains a place or premises for the operation of Class III video machines may not advertise for the playing of the machines. In the instant case, Video Gaming Consultants, Inc. maintained Game Room 2 and Game Room 3. However, the Department did not present sufficient evidence to establish a nexus between the sign displayed on Highway 17 South and Respondent's businesses. In adjudicating this matter, this tribunal is not allowed to employ conjecture, surmise, supposition, suspicion, or guesswork. See S.C. Code Ann. § 1-23-320(i) (Supp. 1997).

While the evidence indicates that a sign displaying the words "Jackpot Video Games" was positioned near the highway in front of Respondent's businesses, the Department offered no direct evidence that Respondent was responsible for erecting or maintaining the sign. Furthermore, based on the record, the sign apparently did not even bear Respondent's name or any name on the facade of the building housing the businesses.

On the issue of advertising, the Department has placed this tribunal in a position where it would have to employ guesswork or conjecture to find that Respondent Video Gaming Consultants, Inc. is responsible for the sign, as the evidence does not support such a finding. Because this type of speculation is impermissible, this tribunal cannot find that Respondent violated § 12-21-2804(B).

  1. Penalty
  2. Section 12-21-2804(A) expressly authorizes the Department to enforce the provisions of this section and to revoke licenses utilized in a fashion that fails to comply with the provisions of this section.
  3. Section 12-21-2804(A) further provides: "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 revocation." The clear meaning of this language precludes the utilization of new licenses for machines to be placed in an establishment for a six month period after that establishment has had a machine license revoked. Hence, as the current machines in Game Room 2 and Game Room 3 have been rendered inoperative by their respective license revocations, and no new machine licenses may be utilized at these locations for six months, the businesses must cease operations for six months. The Department does not issue machine licenses for use at specified locations, but rather to individuals who may utilize them at any qualified location in the State. Consequently, section 12-21-2804(A) would be rendered meaningless if it were read not to require an establishment whose licenses have been revoked to cease operations for six months. See Singletary v. South Carolina Dep't of Educ., 316 S.C. 153, 447 S.E.2d 231 (Ct. App. 1994), (citing State v. Thrift, 312 S.C. 282, 440 S.E.2d 341 (1994)) (legislative intent must prevail if it can be reasonably discovered and language of a statute must be construed in the light of the intended purpose of the statute).

Respondents argue that because most, if not all, of the licenses in question have expired, the Department is precluded from effectuating revocation. Thus, Respondents argue that the imposition of a six month moratorium on operation of the two businesses because of revocation must be rejected. Such reasoning is flawed and inconsistent with the plain wording of the statute, which indicates that the General Assembly intended the six month moratorium to flow as a natural consequence of a proven violation. Clearly, the General Assembly did not intend to create a prohibition so easily defeated as suggested by Respondents.(1) Respondents' interpretation would render the statute meaningless. 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).

  1. S.C. Code Ann. § 12-21-2804(F) (Supp. 1997) provides that a person who violates S.C. Code Ann. § 12-21-2804(A) is subject to a fine of up to $5,000 (emphasis added). The Department seeks a $10,000 fine against each Respondent.(2)
  2. It is a generally recognized principle of administrative law that the fact-finder has the authority to impose an administrative penalty, as established by the legislature, after the parties have had an opportunity for a hearing on the issues. See, e.g., Walker v. South Carolina ABC Comm'n, 305 S.C. 209, 407 S.E.2d 633 (1991).
  3. Based on the facts of this case, the evidence supports a fine of $2,500 against Respondent Video Gaming Consultants, Inc. for violation of § 12-21-2804(A).
  4. Pursuant to ALJD Rule 29(C), issues raised in the proceedings but not addressed in this Order are deemed denied.




ORDER

Based upon the foregoing Findings of Fact and Conclusions of Law, IT IS HEREBY ORDERED that, as mandated by S.C. Code Ann. § 12-21-2804(A) (Supp. 1997), the Department shall revoke the licenses for the eight machines which were located in Game Room 2 and Game Room 3 at 2751 Highway 17 South, Garden City, South Carolina on October 1, 1997.

IT IS FURTHER ORDERED that no Class III video game machine licenses shall be utilized in these two businesses for a period of six months from the date of revocation of the licenses.

IT IS FURTHER ORDERED that the Department shall impose a fine of $2,500 against Respondent Video Gaming Consultants, Inc.

AND IT IS SO ORDERED.

______________________________

JOHN D. GEATHERS

Administrative Law Judge

October 22, 1998

Columbia, South Carolina

1. 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 Comm'n of City of Chicago, 38 Ill. App. 3d 565, 348 N.E.2d 271 (1976); People v. Standard Accident Ins. Co., 17 A.D.2d 1, 230 N.Y.S.2d 145 (1962); Wallman v. New York State Athletic Comm'n, 20 Misc. 2d 398, 194 N.Y.S.2d 213 (1959); Valley Lodge v. Pennsylvania Liquor Control Bd., 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 Licenses and Permits § 83 (1970).

2. Curiously, DOR seeks a $10,000 fine against each Respondent for two violations of the single place or premises requirement of section 12-21-2804(A). DOR's reasoning seems to be that the failure to have an employee in two different game rooms constitutes two separate acts of having more than five machines in a single place or premises, although each of the two game rooms cited for these violations have five or less machines therein.

Notably, DOR's position is a departure from its previous policy of citing a single violation per single place or premises. See S.C. Revenue Procedure 97-2 ("A single violation of $5,000 will be written per single place or premises. Therefore, 10 machines in a single place or premises is one violation, not two violations.").


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