South Carolina              
Administrative Law Court
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SC Administrative Law Court Decisions

CAPTION:
SCDOR vs. The Castle, Inc., d/b/a The Castle I, et al

AGENCY:
South Carolina Department of Revenue

PARTIES:
Petitioners:
South Carolina Department of Revenue

Respondents:
The Castle, Inc., d/b/a The Castle I, The Castle II, The Castle III, and The Castle IV; Will Darwin Wheeler; and Happy Jack Amusement Co.; 2115A Highway 501, Myrtle Beach, S.C.
 
DOCKET NUMBER:
98-ALJ-17-0622-CC

APPEARANCES:
Nicholas P. Sipe Attorney for Petitioner

Douglas L. Hinds
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. 1998) and S.C. Code Ann. § 12-4-30(D) (Supp. 1998) on alleged administrative violations. The South Carolina Department of Revenue alleges that on May 30, 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. 1998) 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. 1998). Additionally, the Department alleges that Respondent The Castle, Inc. violated S.C. Code Ann. § 12-21-2802 by failing to post penalty signs to, or on the wall behind, fifteen video gaming machines.

For the alleged violations of § 12-21-2804(A), the Department seeks a $20,000 fine against Respondent The Castle, Inc., as operator of the four game rooms, a $10,000 fine against Respondent Will Darwin Wheeler, as the owner of the machines in The Castle I and IV, and a $10,000 fine against Respondent Happy Jack Amusement Co., as the owner of the machines in The Castle II and III. Also, the Department seeks revocation of licenses for the fifteen Class III video game machines located in these businesses at 2115A Hwy. 501, Myrtle Beach, South Carolina on May 30, 1997, and preclusion of the use of any Class III video game machine licenses at this location for six months.

For the alleged violation of § 12-21-2802, the Department seeks a $4,500 fine against Respondent The Castle, Inc.

The hearing of this matter was held on March 25, 1999. 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. 1998) and S.C. Code Ann. § 12-21-2802 and (2) 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 The Castle, Inc. violated S.C. Code Ann. § 12-21-2804(A), § 12-21-2802, and 27 S.C. Code Ann. Regs. 117-190 (Supp. 1998) by utilizing video game machine licenses in contravention of these laws. Consequently, the licenses shall be revoked and no video game machine licenses shall be utilized at 2115A Hwy. 501, Myrtle Beach, South Carolina for a period of six months from the date of revocation of the licenses. Further, the Department shall impose fines of $5,000 and $1,500 respectively against The Castle, Inc. for violations of S.C. Code Ann. §§ 12-21-2804(A) and 12-21-2802.



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 May 30, 1997, SLED agents Pamela Williamson and R. Holden conducted an inspection of the video gaming businesses located at 2115A Hwy. 501, Myrtle Beach, South Carolina. After completion of the inspection that day, the agents issued an administrative citation against Respondents for violating the "single place or premises" requirement of S.C. Code Ann. § 12-21-2804(A) (Supp. 1998) and 27 S.C. Code Ann. Regs. 117-190 (Supp. 1998). The agents also issued a citation to Respondent The Castle, Inc. for violating the "penalty sign posting" requirement of S.C. Code Ann. § 12-21-2802.
  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 2115A Hwy. 501, Myrtle Beach, South Carolina was a mall-type structure consisting of four separate rooms designated as The Castle I, The Castle II, The Castle III, and The Castle IV. Each of the rooms contained video gaming machines.
  4. The main entrance into the structure opened into a common area.
  5. Each of the four rooms was open and contained operational Class III video gaming machines which were available for play. The agents went into each room and played Class III video gaming machines for approximately ten minutes during which time no employee was present in the room.
  6. Although there was one employee, Bryan Alsberry, in the common area, no employee was inside any of the rooms.
  7. On May 30, 1997, the following Class III licenses were affixed to the machines in the respective rooms, as designated on Petitioner's Exhibit # 1:
Business Entity License Number
The Castle I 3806074
3806072
3806073
036383
The Castle II 035571
035772
035773
035775
The Castle III 035060
035569
035570
The Castle IV 3806628
3806629
3806630
3806631


  1. The Department seeks a $20,000 fine against Respondent The Castle, Inc., as operator of the businesses, a $10,000 fine each against Respondents Will Darwin Wheeler and Happy Jack Amusement Co., as machine owners, a revocation of the fifteen Class III video game machine licenses referenced herein, and preclusion of the use of any Class III video game machine licenses at the business for a period of six months from the date of revocation.

7. None of the businesses prominently displayed signs citing penalties for tampering with machines, skimming proceeds, or manipulating the outcome of a machine, as required by S.C. Code Ann. § 12-21-2802 (Supp. 1998).

8. The Department seeks a $4,500 against The Castle, Inc. for violating § 12-21-2802.



CONCLUSIONS OF LAW AND ANALYSIS

  1. Jurisdiction
  2. Pursuant to S.C. Code Ann. § 12-4-30(D) (Supp. 1998) and S.C. Code Ann. § 1-23-320 (Supp. 1998), 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 each of the businesses at 2115A Hwy. 501, Myrtle Beach, South Carolina. 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 (Court. App. 1985); Marshall v. Marshall, 282 S.C. 534, 320 S.E.2d 44 (Court. 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. 1998). 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. 1998) 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 clarified 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. 1998) (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, 331 S.C. 629, 503 S.E.2d 723 (1998).

  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 (Court. 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 (Court. App. 1988).
  2. 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" requirement 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 (Court. 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. The establishments at 2115A Hwy. 501, Myrtle Beach, South Carolina failed to meet the "one separate employee" requirement set forth in Regulation 117-190 by failing to have an employee on the premises of each room. While an employee was nearby in the common area, no employee was in any of the rooms during business hours as required.
  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. 1998).
  3. Display of Penalty Signs
  4. S.C. Code Ann. § 12-21-2802 (Supp. 1998) states, "Each machine licensed under this article [Video Game Machines Act] or Article 19 must have a prominently displayed sign citing the penalties provided by Sections 12-21-2790, 12-21-2792, and 12-21-2794 on the wall above the machine or affixed prominently to the machine. The commission shall make these signs available free of charge."
  5. Respondent The Castle, Inc. violated § 12-21-2802 by failing to have prominently displayed penalty signs on the wall above or affixed to the machines.
  1. Penalty
  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. It should be emphasized that S.C. Code Ann. § 12-21-2804(A) (Supp. 1998) 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. 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. Such an interpretation is consistent with the plain language of the statute.

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, The Castle, Inc., the operator of the businesses, unequivocally violated the video gaming statute by its day-to-day operation and maintenance of the businesses. However, the Department has not established that Respondents Wheeler and Happy Jack Amusement Co. violated the statute when applying for the licenses or that they knowingly allowed more than five of their machines to be used at a single place or premises. Because § 12-21-2804(A) has been violated, the fifteen Class III video game machine licenses designated herein are subject to revocation.

  1. 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 machines in the rooms have been rendered inoperative by their respective license revocations, and no new machine licenses may be utilized at this location 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 licensed 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 (Court. 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 contend that the imposition of a six month moratorium on operation of the 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. 1998) 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). Here, the violation occurred, and Respondent The Castle, Inc. was sufficiently identified as the operator of the businesses. Consequently, The Castle, Inc. is subject to a $5,000 fine for a single violation of § 12-21-2804(A).
  2. Section 12-54-40(b)(3) provides that "[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." S.C. Code Ann. § 12-54-40(b)(3) (Supp. 1998) (emphasis added). Respondent The Castle, Inc. is responsible for obtaining licenses for its video poker machines pursuant to § 12-21-2720(A)(3) and the failure to comply with the provisions of § 12-21-2802 subjects it to a fine of $1,500.
  3. 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. 1998), the Department shall revoke the licenses for the fifteen machines which were located in The Castle I, The Castle II, The Castle III, and The Castle IV on May 30, 1997.

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

IT IS FURTHER ORDERED that the Department shall impose fines of $5,000 and $1,500 against The Castle, Inc. for the violations of §§ 12-21-2804(A) and 12-21-2802.

AND IT IS SO ORDERED.



______________________________

JOHN D. GEATHERS

Administrative Law Judge

May 7, 1999

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).


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