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. Gameco, Inc., d/b/a Gold Rush, et al

AGENCY:
South Carolina Department of Revenue

PARTIES:
Petitioners:
South Carolina Department of Revenue

Respondents:
Gameco, Inc., d/b/a Gold Rush; Gameco, Inc., d/b/a Play 2 Win; Gameco, Inc., d/b/a Win 2 Play; and Tim's Amusements, Inc.
 
DOCKET NUMBER:
99-ALJ-17-0020-CC

APPEARANCES:
Petitioner & Representative: South Carolina Department of Revenue, Jeffrey M. Nelson

Respondents & Representatives: Gameco, Inc., d/b/a Gold Rush, d/b/a Play 2 Win, d/b/a Win 2 Play, Brian P. Robinson

Tim's Amusements, Inc., James M. Griffin

Parties Present: All Parties
 

ORDERS:

FINAL ORDER AND DECISION

I. Statement of the Case



The South Carolina Department of Revenue (DOR) seeks an order revoking thirteen Class III video machine licenses, imposing fines of $20,000, and prohibiting for six months the use of Class III machines at the locations involved in this dispute. Tim's Amusements, Inc. (Tim's Amusements), the machine owner, and Gameco, Inc., the location owner, oppose DOR's position. This disagreement places jurisdiction in the Administrative Law Judge Division (ALJD). S.C. Code Ann. §§ 12-60-1310, 12-60-1320, 1-23-600 (Supp. 1998).



The hearing in this matter was held April 28, 1999 at the Edgar Brown Building, Columbia, South Carolina. Based upon the evidence and the arguments presented, Gameco, Inc., d/b/a Gold Rush, d/b/a Play 2 Win, and d/b/a Win 2 Play, is liable for a fine of $12,000; Tim's Amusements is liable for a fine of $2,000; the thirteen Class III video machine licenses held by Tim's Amusements are revoked; and the thirteen Class III machines may not be licensed for a period of six months from the date of this order.





II. Issues



1. Are Tim's Amusements and Gameco, Inc. not in violation of 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) since no separate employee was on the premises due to the business hours of the establishments in question having ended?



2. If a violation of the single place or premises requirement occurred, do the revocation provisions of S.C. Code Ann. § 12-21-2804(A) (Supp. 1998) apply to Tim's Amusements and Gameco or is revocation required only for a violation of the now unconstitutional requirement that the primary and substantial portion of the establishment's gross proceeds must be from a source other than the Class III machines?



3. If a violation of the single place or premises requirement occurred, is Gamecodenied the use of any Class III machines at the location for a period of six months from the time the revocation becomes final or is Tim's Amusements prohibited from licensing the revoked machines for a period of six months from the time the revocation becomes final?



4. If a violation of the single place or premises requirement occurred, is Tim's Amusements as the machine owner not liable for a penalty due to having no involvement in the management affairs of the location?



5. If a violation of the single place or premises requirement occurred, what monetary penalty, if any, is proper for Tim's Amusements and Gameco?

III. Analysis



A. Single Place or Premises: Employee & Closed Business



1. Positions of Parties



DOR asserts that Tim's Amusements and Gameco failed to have an employee on the premises of the game rooms in question here and further that the business hours of the game rooms had not ended at the time of the inspection. Tim's Amusements and Gameco disagree and assert no employee was required on the premises since the locations were closed at the time of the inspection by SLED.



2. Findings of Fact



Based on the preponderance of the evidence, the following findings of fact are entered:



The factual dispute is whether the three game rooms were open or closed at the time of the inspection. Gameco argues the rooms were closed and that such a fact removed any obligation to have an employee on the premises.



A. Background Facts



The structure at 6143 St. Andrews Road, Columbia, South Carolina consists of four business areas accessible to the public: a bar and three game rooms. To operate these activities Gameco employs several employees. On the morning of July 22, 1998, the manager for the day-shift arrived at approximately 8:00 a.m. While no customers were in the building, an employee named "Mike" was at the location performing routine duties. At the time the manager arrived, each of the three rooms had an elastic strap across each entrance with the strap acting as a barrier to entering the room. Each strap held a sign stating, "This Business Closed. Please See Attendant."



At some point during the morning, the manager began "cleaning out" the machines, an activity requiring removal of funds from the equipment. Consistent with standard practice, the front door to the location was locked during this procedure. However, the neon "open" sign on the front of the building remained lit. In fact, other than such temporary times when funds are being removed, the door to the building remains unlocked since the facility is open twenty-four hours a day, Monday through Saturday and closed on Sunday.



In the course of cleaning out the machines on July 22, 1998, the manager discovered that at least one machine was (and perhaps others were also) in need of repair. The machine could not be easily closed nor would the machine easily retain the "bill accepter." As a result of the difficulty with the machine, the manager asked for Mike's assistance in closing the machine and replacing the bill accepter. In assisting in the repair and to facilitate entering and exiting the game rooms, Mike removed the elastic strap from each of the entrances to the three game rooms. In addition a telephone call was made to Tim's Amusements notifying them of the problem and asking for a service call.



After succeeding in repairing the machines, Mike left the building without reattaching the elastic strap to any of the three game rooms. Shortly after Mike's departure, two SLED Agents, operating in an undercover capacity, drove into the parking lot of the location. At approximately noon, the two agents attempted to enter the building but found the door locked. The agents pressed a "buzzer" at the front door to summon an attendant inside. The manager responded by letting the two agents into the building. Upon entering, the manager re-locked the door.



After allowing the two to enter, the manager asked if she could help them or could she get them a drink. They replied they were there to play the machines. The manager did not ask who the two individuals were or whether they were there to repair the machines. She did not ask for any form of identification or explanation of purpose. Rather, the manager assumed the two were either vendors or were from Tim's Amusements. In any event, she left them unattended and proceeded to complete her paperwork in her office. During the time of the inspection, the manager did not enter any of the game rooms but instead remained in her office.



Agent one entered the game room identified as Play 2 Win which housed a three station black jack machine. The lights in the room were on and no barrier barred his entrance. The agent did not play the machine but the machine was plugged in and the monitor screen was lit. However, no employee was in the room.



Both Agent one and two entered Win 2 Play and both agents played the machines in that room. After playing five minutes, agent two left the room while Agent one continued to play for approximately fifteen minutes. Upon leaving, agent two entered the game room identified as Gold Rush and played at least one machine in that room for approximately ten minutes. During the time the two agents were playing the machines, no other customers entered the location.



After inspecting the three game rooms, the two agents revealed to the manager that they were SLED agents conducting an inspection and that the three game rooms were in violation of the Video Game Machines Act. As a result, the agents issued a citation to the manager. The manager telephoned her superior who then talked by telephone to one of the SLED agents.



During the course of completing the paper work associated with the citation, the buzzer at the front door rang. The manager allowed the customer to enter for the purpose of playing the games. Upon completing the paper work, the agents left a copy of the citation with the manager and the agents left. After the agents left the manager unlocked the door.



B. Disputed Facts



No dispute exists that no employee was in any of the game rooms. Rather, the disputed question of fact is whether the three game rooms were open or closed during the time of the inspection. Based on the totality of the evidence, I find all three game rooms were open.



Here, a locked front door is not persuasive evidence that the location was closed. Rather, despite a locked front door, the agents were allowed entrance into the building by pressing a buzzer. In addition, during the inspection itself, another customer was allowed entrance into the building by also pressing the buzzer. Thus, instead of a locked door meaning the business was closed, the locked door meant the business was open but admittance required pressing the buzzer. Such a conclusion is further bolstered by the fact that at all times during the inspection the location had a prominently displayed sign on its front entrance saying "open." Thus, the locked door does not support a conclusion that the location was closed.



Additionally, once the agents gained entrance to the interior of the location, no sufficiently persuasive evidence shows the game rooms were closed. On the contrary, the evidence persuasively establishes the rooms were open.



All three game rooms are equipped with an elastic strap that, if utilized, would identify the rooms as closed. Indeed, the testimony establishes that having the strap across the entrance was the common means of closing a room. Here, however, none of the three rooms had the elastic strap across the entrance. Further, the manager did not challenge the agents's access to the rooms. In addition, all three rooms had their lights on and the machines in the rooms were fully powered for operation. In fact, the agents played the machines in two of the rooms and no evidence persuasively supports a finding that the machines in the Black Jack room were inoperable. Rather, all of the rooms had machines available for play.



Accordingly, under the facts proven in this case, the three game rooms had business hours that were still in progress at the time of the inspection. Thus, the three game rooms were not closed.



3. Conclusions of Law



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



A. Applicable Law of Closed Business Hours



DOR asserts the three game rooms were without a separate employee on the premises "during business hours." Regs. 117-190. In establishing this allegation, DOR bears the burden of proving when the location's business hours began and when they ended. See 2 Am. Jur. 2d Administrative Law § 360 (1994) (burden of proof generally rests with the party who asserts the affirmative of an issue).



Business hours begin at the moment a location opens for the transacting of its business. See Jolly v. Marion Nat. Bank, 267 S.C. 681, 231 S.E.2d 206, (1976) (a shareholder's access to records during business hours is allowed as long as the access is for those hours of those days during which business could be transacted). However, deciding when business hours conclude is a factual issue based upon the totality of the circumstances for the time period in dispute. See Dym v. Merit Oil Corporation, 36 A.2d 276 (Conn. 1944) (even for a facility which appeared to be closed for the night, a weighing of the facts can find a facility open where no closed sign is conspicuously displayed at the entrance to the premises and where doors at the facility are unlocked.). In this case, when considered as a whole, the evidence demonstrates that the game rooms in dispute were open for business at the time of the SLED Agents' inspection.



B. Law Applied to Facts



Here, as explained in the Findings of Fact, the locked front door is not persuasive evidence that the location was closed. Rather, access was granted to the open business by pressing a buzzer. Further, none of the three rooms had the elastic strap extended across the entrance way. Instead of denying access, the rooms invited entrance since all three rooms had their lights on and the machines in the rooms were fully powered for operation. Most telling, the agents played the machines in two of the rooms and were never told the rooms were closed despite playing for approximately fifteen minutes. Thus, the rooms were open, no employee was on the premises of each of the game rooms, and a violation of the single place or premises provision of S.C. Code Ann. § 12-21-2804 occurred on July 22, 1998.

B. Revocation: Gross Proceeds



1. Positions of Parties



Tim's Amusements argues that even if a violation occurred, revocation of the Class III licenses is improper. Rather, it asserts the revocation applies only to the requirement that the primary and substantial portion of the establishment's gross proceeds must be from a source other than the Class III machines. Such being the case, it further argues that the "gross proceeds" provision was declared unconstitutional by Reyelt v. South Carolina Tax Commission, 6:93-1491-3 and 6:93-1493-3 (U.S. Dist. Ct., Greenville, S.C., Nov. 15, 1993) and therefore, the revocation cannot apply. DOR disagrees and argues the revocation provision is triggered by violating the single place or premises requirement.



2. Findings of Fact



Based on the preponderance of the evidence, the following findings of fact are entered:



A violation of the single place or premises requirement occurred at the 6143 St. Andrews Road location on July 22, 1998. Of the thirteen machines found in violation, all are owned by Tim's Amusements and all are housed in the game rooms owned and operated by Gameco. Tim's Amusements has no management control of any employee working for Gameco and Gameco exercises day-to-day management control over employees at its three game rooms.



3. Conclusions of Law



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



A. Statutory Requirements for Revocation



DOR "shall revoke the licenses of machines located in an establishment which fails to meet the requirements of this section." S.C. Code Ann. § 12-21-2804(A) (Supp.1998). Here, the three establishments do not meet the demands of the single place or premises requirement. Accordingly, the machine licenses located therein must be revoked.



I disagree with the view of Tim's Amusements. The revocation is for "the licenses of machines located in an establishment which fails to meet the requirements of this section." S.C. Code Ann. § 12-21-2804(A) (Supp.1998). The statute's use of the plural word "requirements" obviously means the licensee must meet more than one requirement and that the failure to satisfy any requirement invokes the revocation. See Emerson Elec. Co. v. Wasson, 287 S.C. 394, 339 S.E.2d 118 (1986) (the legislature's use of the plural "taxpayers" instead of "taxpayer" indicates more than one).



Here, at least two requirements are addressed in the subsection imposing the revocation. The first requirement is the single place or premises requirement. S.C. Code Ann. § 12-21-2804(A) (Supp.1998). The second requirement is the gross proceeds requirement. S.C. Code Ann. § 12-21-2804(A) (Supp.1998). Thus, even treating the gross proceeds requirement as no longer a part of the law, a failure to satisfy the single place or premises requirement still triggers the revocation. Accordingly, Tim's Amusements's thirteen licenses for the Class III machines located in the game rooms identified as Win 2 Play, Play 2 Win, and Gold Rush must be revoked.



C. Six Month Prohibition



1. Positions of Parties



DOR asserts the statute requires a prohibition on the use of any Class III machines at the location for a period of six months from the time the revocation becomes final. Gameco argues that if a revocation is applied, no six month penalty should be imposed on the location, but only on the machines in use at the time of the violation.



2. Findings of Fact



Based on the preponderance of the evidence, the following findings of fact are entered:



Tim's Amusements placed thirteen Class III machines in three game rooms known as Win 2 Play, Play 2 Win, and the Gold Rush. At the time of the inspection on July 22, 1998, Gameco operated the three game rooms housing the thirteen Class III machines and Gameco held retail licenses issued by DOR pursuant to Chapter 36 of Title 12 of the S.C. Code. At the time of the inspection, the three game rooms were licensed establishments.



Judicial notice is taken of the published decisions of the Administrative Law Judge Division and of the numerous instances in which DOR has argued before the Division that S.C. Code Ann. § 12-21-2804(A) imposes a six month prohibition on the use of any Class III machine at the offending location. However, judicial notice is also taken of the extensive opposition to DOR's view. In hearings before the Division, license holders routinely and repeatedly object to DOR's position.



3. Conclusions of Law



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



A. Prohibition Applicable to Machines or to Location



1. Introduction



The following language of § 12-21-2804 is in issue:



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 the revocation.



This language has produced two interpretations. DOR's interpretation is that once a license for a Class III machine in a location is revoked, the location is prohibited from having any Class III machines on its premises for a period of six months from the date of the revocation. This view is the "dead location" interpretation. Gameco's interpretation is that once the location has a revocation of a Class III machine license, the machines within the establishment (but not the establishment itself) are prohibited from being re-licensed as Class III machines for a period of six months from the date of the revocation. This view is the "dead machines" interpretation. Considering the plain language of the statute and applying the legislative intent as gleaned from applicable factors, the six month prohibition applies to the machines involved and not to the location involved.



2. Legislative Intent



Courts do not legislate. Rather, when asked to interpret the meaning of a statute, the task is solely that of seeking to effectuate the legislature's intent. Laird v. Nationwide Ins. Co., 243 S.C. 388, 134 S.E.2d 206 (1964). In deciding legislative intent, the first and most basic inquiry is whether the language of the statute is plain and unambiguous and whether the statute conveys a clear and definite meaning. If the answer is yes, no occasion exists for employing rules of statutory interpretation, and the court has no right to look for or impose another meaning. Paschal v. State Election Comm'n, 317 S.C. 434, 454 S.E.2d 890 (1995).



However, where an ambiguity prevents the statute from conveying a clear and definite meaning, the court must find the legislative intent through statutory construction. See Abell v. Bell, 229 S.C. 1, 91 S.E.2d 548 (1956) ("But where the language of the statute gives rise to doubt or uncertainty as to the legislative intent, the search for that intent may range beyond the borders of the statute itself; for it must be gathered from a reading of the statute as a whole in the light of the circumstances and conditions existing at the time of its enactment.") An ambiguity arises when the meaning of the language is doubtful or provides "doubleness of meaning." Chapman v. Metropolitan Life Ins. Co., 172 S.C. 250, 173 S.E. 801, 803 (1934); see also Southeastern Fire Ins. Co. v. S.C. Tax Comm'n, 253 S.C. 407, 171 S.E.2d 355 (1969) (language is ambiguous when it is capable of being understood by reasonably well-informed persons in either of two or more senses.).



Here, I am not convinced that the language is devoid of a clear and definite meaning. A plain and unforced reading requires a dead machine result and does not support a dead location result. However, even if the statute creates an ambiguity, an inquiry into statutory construction still leads me to conclude that the legislature imposed a six month prohibition on the machines and not on the location.



a. Plain Meaning



The plain meaning of a statute is best determined by reading the statute as a whole so that phraseology of an isolated section is not controlling. City of Columbia v. Niagara Fire Insurance Company, 249 S.C. 388, 154 S.E.2d 674 (1967). When read as a whole, S.C. Code Ann. § 12-21-2804(A) states that DOR is required to "revoke the licenses of machines located in an establishment which fails to meet the requirements of [§ 12-21-2804]." Under that language, a failure to satisfy the single place or premises requirement causes a revocation of all of the machine licenses in the establishment that failed to meet the test. As a result of that violation, an establishment becomes filled with unlicensed machines.



In fact, that is precisely what has happened in this case. Tim's Amusements's thirteen machines effectively became unlicensed, and those unlicensed machines were incapable of being lawfully operated until new licenses were issued. See S.C. Code Ann. § 12-21-2776 (Supp. 1998) (all machines must be licensed). This factual and legal background supplies the proper context for an unforced reading of the plain language of the six month prohibition.



Following the statutory language revoking the machine licenses in the offending establishment, the statute immediately and succinctly states "[n]o 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 the revocation." In other words, the specific machines that lost their licenses due to the revocation are prohibited from receiving a new machine license until a six month period has elapsed.



When relying upon the plain meaning of words in a statute, the words must be applied without resorting to a subtle or forced construction to limit or expand the statute's operation. Stephen v. Avins Constr. Co., 324 S.C. 334, 478 S.E.2d 74 (Ct. App. 1996). The interpretation expressed above provides a plain, unforced reading that answers an obvious need raised by the revocation language. Obviously, to make the revocation meaningful, a fixed period is needed. Otherwise, the owner would be able to acquire a new license the same day as the revocation and begin operating the same machine almost immediately. In my view, the six month period simply tells the owner that the machine is dead for six months and serves to give teeth to the revocation of the machine license.(1)



In contrast to the plain reading of the language that supports the dead machine interpretation, a reading giving a dead location requires a forced construction. For example, to impose a six month limitation on the location requires reading additional language into the statute so that the statute states "no license may be issued for a machine TO BE PLACED in an establishment in which a license has been revoked for a period of six months from the date of the revocation." (Capitalized words added). Obviously, a court may not add words to a statute but can only apply the statutory language given by the General Assembly. Banks v. Columbia Ry., Gas & Electric Co., 113 S.C. 99, 101 S.E. 285 (1919).



Accordingly, § 12-21-2804(A) imposes a six month prohibition on the issuance of licenses for those Class III machines that were in an establishment at the time a license for a machine in that establishment was revoked. No prohibition is imposed on the location itself.



b. Statutory Construction



While I believe a plain reading requires a dead machine interpretation, even if resort to statutory construction is required, such an inquiry does not support a dead location view.



A commonly applied rule of statutory construction is that where the same words are used in an enactment more than once, it is presumed the words have the same meaning throughout unless a different meaning is necessary to avoid an absurd result. Busby v. State Farm Mut. Auto. Ins. Co., 280 S.C. 330, 312 S.E.2d 716 (Ct. App. 1984). Likewise, when the legislative body defines a term, the use of that term in the enactment must be interpreted as having the defined meaning. Windham v. Pace, 192 S.C. 271, 6 S.E.2d 270 (1939).



In the Video Game Machines Act (Act), Class III machines must be licensed under Article 19 before placement or operation on the premises of a "licensed establishment." S.C. Code Ann. § 12-21-2778 (Supp. 1998). The legislature defined "licensed establishment" as an "establishment owned or managed by a person who is licensed pursuant to Article 19 of this chapter for the location of coin-operated nonpayout video machines with a free play feature." S.C. Code Ann. § 12-21-2772(4) (Supp. 1998). To impose a location penalty, the legislature could simply have stated the establishment may not be a licensed establishment for six months. No such statement was made.



Additionally, Article 20 imposes a further license beyond the establishment license required by Article 19. Specifically, Article 20 requires a location license since "[e]ach . . . licensed establishment must be licensed by [DOR] pursuant to Article 19 of this chapter and this article before a machine . . . is placed for public use in this State."(2) S.C. Code Ann. § 12-21-2784 (Supp. 1998) (emphasis added). The location license of Article 20 is identified as an "establishment license for machine placement." S.C. Code Ann. § 12-21-2788 (Supp. 1998). In fact, DOR is required to revoke "an establishment license for machine placement" when the placement of machines does not meet "the provisions of Article 19 of this chapter and the [corresponding] rules and regulations promulgated by [DOR]." Id.; S.C. Code Ann. § 12-21-2786 (Supp. 1998). (3) Again, the General Assembly could have easily penalized the location by revoking the establishment license for machine placement.



Finally, the location may not house Class III machines "unless the location is licensed pursuant to the provisions of Chapter 36 of Title 12." S.C. Code Ann. § 12-21-2703 (Supp. 1998). Again, the General Assembly could have directed that the retail license be revoked if it wished to close the location for six months. It did not so direct.



Accordingly, at least three areas of location or establishment licenses are available for revocation. Despite these location licenses, § 12-21-2804(A) directs the revocation of only "licenses of machines" and not location licenses. These statutes demonstrate that the General Assembly was cognizant of the difference between a license for a machine and a license involving an establishment or location. Being aware of the difference, the statutory language of § 12-21-2804(A) provided for the revocation of the licenses for the machines and made no mention of revocation of an establishment license.



Such a conclusion is consistent with a plain and unforced reading of the statute which shows that a symmetry exists between the revocation of the machine licenses and the imposition of a six month prohibition on re-licensing the affected machines. The symmetry is broken by the dead location view since the revocation of a machine license produces a closure of a location for six months. Had the General Assembly meant to revoke the establishment or location license it could have easily done so by specifying the revocation of a specific establishment license. Accordingly, the normal rules of statutory construction support the dead machine interpretation.



c. Deference To Agency



DOR argues its position should be followed since it is the agency charged with administering the video games law. DOR believes the facts are well established that it has consistently applied its interpretation of S.C. Code Ann. § 12-21-2804(A) (Supp. 1998). Further, under such circumstances, DOR believes that its position is reasonable and should be accorded great deference. Finally, in deciding whether to deviate from DOR's position, DOR asserts compelling reasons must be established. In significant part, I disagree with DOR's analysis as it relates to the weight to be accorded that agency's interpretation of S.C. Code Ann. § 12-21-2804(A) (Supp. 1998).



i. Consistently Applied Position



No doubt exists that DOR has consistently applied its position. Judicial notice is taken of the published decisions of the Administrative Law Judge Division and of the numerous instances in which DOR has advanced its position in hearings before the Division. DOR has consistently viewed S.C. Code Ann. § 12-21-2804(A) as imposing a six month prohibition on the use of any Class III machine at the offending location.



However, judicial notice is also taken of the extensive opposition to DOR's view. In hearings before the Division, license holders routinely and repeatedly object to DOR's position. The validity of that position is now pending in the S.C. Supreme Court in the case of Gateway Enterprise, Inc., v. DOR. Thus, the position of DOR is not one which has found routine acceptance by the affected public. On the contrary, DOR's position is far from a settled view.



ii. Deference To DOR's Position



The issue in interpreting a statute is what did the legislature intend. Laird v. Nationwide Ins. Co., 243 S.C. 388, 134 S.E.2d 206 (1964). Depending upon the nature of the language under review, an agency's view may or may not be entitled to deference.



-- Plain Meaning



No deference to an agency's position is warranted where the language presents a clear meaning. Glens Falls Insurance Co. v. City of Columbia, 242 S.C. 237, 130 S.E.2d 573 (1963) (no occasion arises for considering an agency's position where the language of the statute is plain and unambiguous and conveys a clear and definite meaning). Further, of particular significance to this case, the clear and definite meaning will always be applied despite an agency's contrary but consistently followed position. Davidson v. Eastern Fire & Cas. Ins. Co., 245 S.C. 472, 141 S.E.2d 135 (1965) ("An uninsured motorist endorsement that contravenes the requirements of the statute is, to that extent, invalid, regardless of the Department's approval of it.").



Here, the statute in dispute is plain and unambiguous. The plain language of § 12-21-2804(A) imposes a six month prohibition on the issuance of licenses for those Class III machines that were in an establishment at the time a license for a machine in that establishment was revoked. Thus, having found that the plain meaning of the statute establishes legislative intent, no deference to DOR's position is required.



-- Ambiguous Meaning



However, even if an ambiguity were found in the statute, a resort to rules of construction supports the view that the revocation affects the machines but not the location. In examining the rules of statutory construction, deference to DOR's view is not a meaningful indicator of legislative intent when compared to other more significant indicators.



When required to apply the rules of construction, the construction of a statute by an agency charged with administering that statute is entitled to most respectful consideration. Stephenson Finance Co. v. South Carolina Tax Comm'n, 242 S.C. 98, 130 S.E.2d 72 (1963). More particularly, however, the degree of respect rises to one of "great weight" only if the agency position "has been acquiesced in by the [Legislature] for a long period of time." Etiwan Fertilizer Co. v. South Carolina Tax Comm'n, 217 S.C. 354, 60 S.E.2d 682 (1950).



Here, the Video Game Machines Act became effective July 1, 1993. Thus, even assuming DOR's position was announced, enforced or in some way made known to the Legislature from the first day the statute became effective, DOR's position is five years old. Such a time frame is far too short to amount to a showing of acquiescence "by the Legislature for a long period of time." Id. Hence, the short period does not show strong evidence of acquiescence by the Legislature and does not allow "great weight" to be accorded to DOR's position. Such is especially so where the agency position is challenged repeatedly by the affected public. At best, only respectful consideration is due.



The Legislature is presumed to have knowledge of its own laws. See Ingram v. Bearden, 212 S.C. 399, 47 S.E.2d 833 (1948)(a machine was definitely outlawed by prior statute and the General Assembly was deemed to be aware of that fact). Respectful consideration to DOR's position (which consideration relies upon a presumption that the Legislature has knowledge of and gives tacit approval to the agency's actions) pales in comparison to the Legislature's presumptive knowledge of its own laws. The Legislature intentionally created licensed establishments and created machine licenses. Further, the Legislature defined licensed establishments and demonstrated it clearly knew the difference between machine licenses and establishment licenses. Thus, reliance upon the Legislature's knowledge of its own laws is a far superior indicator of legislative intent than reliance upon the respectful consideration of DOR's position.



iii. Compelling Reasons



While others may exist, at least two compelling reasons warrant deviating from DOR's view. First, DOR's position is inconsistent with the plain meaning of the statute such that reliance upon DOR's view places far too much weight on an administrative interpretation. See Stone Mfg. Co. v. South Carolina Employment Sec. Comm'n, 219 S.C. 239, 64 S.E.2d 644 (1951) citing F. W. Woolworth Co. v. United States, 91 F.2d 973, 976 (2d. Cir. 1937) ("At most, administrative practice is a weight in the scale, to be considered, but not to be inevitably followed. * * * While we are of course bound to weigh seriously such rulings, they are never conclusive."). Second, a compelling reason to deviate from DOR's view is that following the position perpetuates an administrative error. Fennell v. South Carolina Tax Commission, 233 S.C. 43, 103 S.E.2d 424 (1958) (an interpretation presented by an administrative position is not so sacrosanct as to be beyond the correction of error; it need not perpetuate error). In short, sufficient and compelling reasons exist to deviate from DOR's position.

D. Applicability of Penalty to Machine Owner



1. Positions of Parties



DOR asserts that a fine of $5,000 is due from Tim's Amusements as the holder of the machine license. Tim's Amusements argues it is not liable for a penalty since as a machine owner it had no part in violating the single place or premises requirement. In response to Tim's Amusements's argument, DOR asserts that a violation of S.C. Code Ann. § 12-21-2804 has been established and that a fine is imposed on the license holder. Further, the fine is not dependent upon a showing of scienter or that knowledge of the violation was present in Tim's Amusements.







2. Findings of Fact



Based on the preponderance of the evidence, the following findings of fact are entered:



No dispute exists that Tim's Amusements has no management control of any employee working for the game rooms involved in this case. Rather, the day-to-day management control over employees at the three game rooms was totally outside Tim's Amusements and was in Gameco. However, despite a lack of daily control, Tim's Amusements regularly repaired the machines, serviced the machines, and shared profits and losses with the location operator. Accordingly, maintenance and control of the licenses to the Class III machines is in Tim's Amusements.



3. Conclusions of Law



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



A violation of section 12-21-2804(A) results in the imposition of a fine. S.C. Code Ann. § 12-21-2804(F) (Supp. 1998). The pertinent question is: a fine against whom?



A. Persons Liable



The person liable for the fine is the "person violating" section 12-21-2804(A). S.C. Code Ann. § 12-21-2804(F) (Supp. 1998). For periods beginning after July 1, 1994 (obviously the case in this matter), the person violating § 12-21-2804(A) is the one who "maintain[s] any licenses or permits for more than five machines authorized under Section 12-21-2720(A)(3) at a single place or premises."(4) S.C. Code Ann. § 12-21-2804(A) (Supp. 1998). Persons maintain licenses for more than five machines if they "continue or preserve in or with; to carry on." Black's Law Dictionary 953 (6th ed. 1990); see also Merriam-Webster OnLine Dictionary, 1999 ("maintain" means "to continue or persevere in: carry on, keep up" or "to support or provide for.").(5)



Who carries on the license in this case? Both Tim's Amusements and Gameco. Both maintained the licenses for the machines owned by Tim's Amusements. The joint "maintaining" is evident from the parties agreement to share in the profits or losses produced by the license. Indeed, that sharing is established by a contract in which the two parties agree on their respective duties in relation to the license. Tim's Amusements maintains and carries on the licenses by repairing the machines, making visits to assure the license is on a properly functioning machine, and, not insignificantly, providing the very license needed to operate the machines.



Likewise, Gameco maintains the licenses as well. By contract Gameco shares in the maintenance of the licenses since Gameco receives profits and losses from the license and provides all of the operational environment for the machines: housing, seating and equipment for customers, required employees, adequate parking, etc. Duties performed by Gameco are ones that Tim's Amusements would have had to perform itself; however Tim's Amusements chose instead to have Gameco maintain the license by performing tasks necessary to carry on the license. Accordingly, both Tim's Amusements and Gameco maintained the licenses on the Class III machines. As such, Tim's Amusements, as one of the maintainers of the licenses, is liable for a fine. S.C. Code Ann. § 12-21-2804(F) (Supp. 1998).



B. Lack of Knowledge



For two reasons, the fact that Tim's Amusements had no day-to-day control over the employees does not remove the imposition of a fine. First, the General Assembly did not impose a duty of finding the violator had any degree of intention such as "knowingly," "intentionally" or "willfully." Instead of an intention to violate the law, all the statute demands is proof that a license is being maintained for more than five machines at a single place or premises. In fact, the General Assembly has demonstrated that when it wanted to impose scienter as a part of a violation it did so by specific language. See S.C. Code Ann. §12-21-2804(F) (upon a determination that a violation is wilful, criminal prosecution may be pursued). Second, since the statutory language does not impose knowledge as a requirement, none can be added. Accordingly, lack of knowledge or intention does not halt the imposition of a fine against Tim's Amusements.



E. Amount of Penalty



1. Positions of Parties



DOR asserts that a fine of $5,000 is due from Tim's Amusements as the holder of the machine license, and $15,000 is due from Gameco as the location owner. Both Tim's Amusements and Gameco argue the penalty is too severe.



2. Findings of Fact



Based on the preponderance of the evidence, the following findings of fact are entered:



Gameco's policy is that an employee must be assigned to a single game room and that if a game room is closed, the elastic strap will be stretched across the entrance to mark the room as closed. However, that policy was not followed at the time of the inspection on July 22, 1998. Rather, no barrier barred entrance to the game rooms.



Tim's Amusements places the machines with Gameco and each share in the profits of the machines. Under this arrangement, management of the rooms in which the Class III machines are located is in Gameco. However, actual maintenance and control of the Class III machines is in Tim's Amusements. In summary, as to the operation of the machines, Gameco uses the game rooms for its retail business and Tim's Amusements uses the game rooms for its ownership of machines.



3. Conclusions of Law



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



A violation of section 12-21-2804(A) results in the imposition of a fine. S.C. Code Ann. § 12-21-2804(F) (Supp. 1998). In this case the persons liable for the fine are Tim's Amusements and Gameco. S.C. Code Ann. § 12-21-2804(F) (Supp. 1998).



Where the General Assembly authorizes a range for an administratively imposed penalty, the administrative adjudicator sitting as the fact-finder may set the amount of the penalty after a hearing on the dispute. Walker v. South Carolina ABC Comm'n, 305 S.C. 209, 407 S.E.2d 633 (1991). When penalty disputes are part of the factual issues for decision, the fact-finder must receive evidence and make a determination on all such factual disputes arising from the contested case. S.C. Code Ann. § 1-23-350 (Rev. 1986).



Here, the evidence establishes that Tim's Amusements and Gameco both violated section 12-21-2804(A). Gameco has a policy of having an elastic strap extended across the doorway to indicate the room is closed. However, that policy was not followed in this matter. Rather, three rooms were easily accessible by the public and none of those rooms had an employee on the premises.



Mitigating factors weigh against assessing the maximum penalty to either Gameco or Tim's Amusements. First, this is the first violation for this location under the management of Gameco. Second, the failure to extend the elastic strap closing the rooms was an error resulting from a repair problem to the machines. Thus, the error was the exception to the rule rather than the normal operational pattern of the business. Accordingly, for the three establishments operated by Gameco, a penalty of $4,000 for each is proper giving a total penalty against Gameco of $12,000. As to Tim's Amusements, no management control rested in it. While a party who derives income from the machines should not be dismissed from liability for violations on the very premises that produce the income, the lack of control over the cause of the violation is a mitigating factor. Given Tim's Amusements's lesser control in this matter, Tim's Amusements is liable for a penalty of $2,000.(6)



IV. Order



Based upon the Findings of Fact and Conclusions of Law, it is hereby ordered:



Gameco, Inc., d/b/a Gold Rush, d/b/a Play 2 Win, d/b/a Win 2 Play is liable for a fine of $12,000, Tim's Amusements is liable for a fine of $2,000, the thirteen Class III video machine licenses held by Tim's Amusements are revoked, and the thirteen Class III machines may not be licensed for a period of six months from the date of this order.



Further, to assure compliance with the six month prohibition, Tim's Amusements must provide DOR with the serial numbers of the thirteen machines for which licenses are revoked by this order and must provide to DOR the exact location of the thirteen machines at all times during the six month prohibition period.



AND IT IS SO ORDERED.



____________________________

RAY N. STEVENS

Administrative Law Judge



Dated: May 3, 1999

Columbia, South Carolina

1. Certainly, the dead machine view allows the location owner to buy or lease new machines, purchase new licenses and begin operation almost immediately at the same location. However, the machine revocation penalty is meaningful since the cost includes new licenses, new machines, and leaves old machines that are worthless for six months. The General Assembly provided this result and a court should not rewrite statutes to provide a "better" penalty since such matters rest solely within the wisdom of the General Assembly. Creech v. South Carolina Pub. Serv. Auth., 200 S.C. 127, 20 S.E.2d 645 (1942).

2. The additional license of Article 20 also applies to other entities; machine manufacturers, distributors, and operators must obtain the Article 20 license.

3. The "establishment license for machine placement" is not the retail sales tax license of S.C. Code Ann. § 12-36-510 (Supp. 1998) required by S.C. Code Ann. § 12-21-2703 (Supp. 1998). The name "retail license" is well known by the legislature. See 12-36-510 (Supp. 1998). Had the legislature meant "retail license" in § 12-21-2788 it would have used that name. Rather, the Article 20 "establishment license" assures Class III machines meet the technology demands of §§ 12-21-2782 and 12-21-2783. S.C. Code Ann. § 12-21-2784 (Supp. 1998).

4. The statute explains that DOR may not "authorize to be maintained" any licenses or permits for more than five Class III machines at a single place or premises. Thus, if DOR is not authorized to allow one to maintain more than five licenses, then the person who improperly maintains the excess number of licenses is the person who violates the statute.

5. In arriving at the meaning of words used in a statute, the primary rule is to ascertain and give effect to the legislature's intent or purpose as expressed in the statute. Green v. Thornton, 265 S.C. 436, 219 S.E.2d 827 (1975). The legislature's intent should be ascertained primarily from the plain language of the statute. 82 C.J.S. Statutes § 322 (b), at 571 (1953). Unless the statute requires a different interpretation, the words used must be given their ordinary meaning. Hughes v. Edwards, 265 S.C. 529, 220 S.E.2d 231 (1975).

6. DOR seeks a single $5,000 penalty against Tim's Amusements rather than a $5,000 penalty for each of the three establishments.


Brown Bldg.

 

 

 

 

 

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