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SC Administrative Law Court Decisions

CAPTION:
SCDOR vs. L’il Cricket Food Stores, Inc. #235

AGENCY:
South Carolina Department of Revenue

PARTIES:
Petitioners:
South Carolina Department of Revenue

Respondents:
L’il Cricket Food Stores, Inc. #235
 
DOCKET NUMBER:
99-ALJ-17-0056-CC

APPEARANCES:
For the Petitioner: Jeffrey M. Nelson, Esquire

For the Respondent: Donald C. Coggins, Jr., Esquire
 

ORDERS:

FINAL ORDER AND DECISION

STATEMENT OF THE CASE

This matter is before me pursuant to S.C. Code Ann. § 12-4-30 (Supp. 1997) and S.C. Code Ann. § 1-23-600 (Supp. 1998) upon Respondents’ request for a hearing. The South Carolina Department of Revenue ("Department") seeks a $500 penalty against each of the Respondents for tendering cash payouts in excess of $125 in a twenty-four hour period in violation of S.C. Code Ann. § 12-21-2791 (Supp. 1997).

Pursuant to ALJD Rule 19(D), I find that the above-captioned cases should be consolidated because the evidence, facts, and circumstances in each case are nearly identical.

A hearing was held before the Administrative Law Judge Division in Spartanburg, South Carolina, on April 23, 1999. I find that the Respondents violated Section 12-21-2791 and impose the appropriate penalty.

FINDINGS OF FACT

After consideration and review of all the evidence and testimony and having judged the credibility of the witnesses, by a preponderance of the evidence, I make the following findings of fact:

1. Notice of the date, time, place and subject matter of the hearing was timely given to the Petitioner and the Respondents.

2. On March 26 and 27, 1998, Deputy Darren Dukes of the Spartanburg County Sheriff’s Department and Mr. Wilbur Grizzle, a confidential informant, conducted investigations of the Respondents’ businesses to determine whether the Respondents’ were making payouts in excess of the $125.00 limit contained in S.C. Code Ann. § 12-21-2791 (Supp. 1997).

3. At each store, Deputy Dukes gave Mr. Grizzle between $130.00 and $150.00 to play a Class III machine.

4. In each instance, Mr. Grizzle played a Class III machine for approximately 10 minutes. Mr. Grizzle would then "cash out".

5. In each instance, Mr. Grizzle obtained two (2) tickets or vouchers from the machines. One ticket was for $125.00 and the other ticket was for $10.00 to $30.00.

6. Mr. Grizzle gave the tickets to Deputy Dukes. Deputy Dukes took the tickets to the cashier and, in every store, the cashier paid a total "pay out" to Deputy Dukes of between $135.00 and $155.00.

7. The cashiers requested that Deputy Dukes sign the tickets and present his driver’s license for their review.

8. The only other request that a cashier made was at Store #235 (99-ALJ-17-0056-CC). This clerk asked Deputy Dukes if he was affiliated with law enforcement in any way. Deputy Dukes told her that he was not, and the clerk paid Dukes $150.00.

9. Deputy Dukes audio taped the transactions with the clerks in every store.

DISCUSSION

S.C. Code Ann. § 12-21-2791(Supp. 1997) provides:

Any location which operates or allows the operation of coin-operated machines pursuant to Section 12-21-2720(A)(3) which provides payouts shall limit the cash payout for credits earned for free games to two thousand five hundred credits a player a location during any twenty-four hour period. The cash value of credits for each free game is limited to five cents.

The Respondents contend that this statute applies to winnings over and above the amount of money deposited in a video poker machine by a player. The Respondents further state that the plain language of the statute clearly manifests the legislature’s intent to limit payouts to credits that are won as opposed to credits that are automatically received by depositing money in the machine. The Department argues that the statute prohibits a location from making payouts of more that $125.00 to any player in a twenty-four hour period regardless of the amount of money deposited by that player. The Department contends that this interpretation is evidenced by the plain language of the statute, the legislative history of Section 12-21-2791, and the Department’s long standing administrative application of this provision over the past five years.

In order to apply the rules of statutory construction, a court must first find an ambiguity within the statute itself. A cardinal rule of statutory construction is that the words used in a statute should be given their plain and ordinary meaning. Multimedia, Inc. v. Greenville Airport Commission, 287 S.C. 521, 339 S.E.2d 884 (Ct. App. 1986); Hughes v. Edwards, 265 S.C. 529, 220 S.E.2d 231 (1975). When the terms of a statute are plain and unambiguous, the courts must apply those terms according to their literal meaning, without resort to subtle or forced construction in an attempt to limit or expand the scope of the statute. Holley v. Mount Vernon Mills, Inc., 312 S.C. 320, 440 S.E.2d 373 (1994); First Baptist Church of Mauldin v. City of Mauldin, 308 S.C. 226, 417 S.E.2d 592 (1992). If a statute’s language is plain and unambiguous and conveys clear and definite meaning, there is no occasion for employing rules of statutory interpretation, and the court has no right to look for or impose another meaning. Miller v. Doe, 312 S.C. 444, 441 S.E.2d 319 (1994). I find no ambiguity in Section 12-21-2791. "Credits earned for free games" refers to the games or credits available to a player "without any additional cost" to the player. See Holliday v. Governor of State of South Carolina, 78 F.Supp. 918, 922 (W.D.S.C. 1948), aff’d, 335 U.S. 803 (1948). In other words, "credits earned" means "the credits the player has at the conclusion of play regardless of whether they are due to money the player put in or credits later won. . . ." Johnson v. Collins Entertainment Co., Inc., 3:97-2136-17 (D.S.C. August 25, 1998). Therefore, Respondents’ argument that the statute imposes a $125.00 limit on credits earned through play and not credits that are automatically received upon depositing cash in the machine is without merit.

Alternatively, if the provision was ambiguous and did not convey a clear and definite meaning, the rules of statutory interpretation would support DOR’s interpretation. DOR "guidelines" set forth in "A Guide to Conducting Video Gaming Establishments in South Carolina" (1993) interprets S.C. Code Ann. § 12-21-2791 (Supp. 1997) to limit the cash payout on credits remaining on the machine to $125 regardless of the amount of credit "originally purchased by the player." Interpreting S.C. Code Ann. § 12-21-2791 (Supp. 1997) to apply only to winnings above the initial cash deposit into a Class III video game machine would create an absurd and unworkable result. See Johnson v. Collins Entertainment Co., Inc., 3:97-2136-17 (D.S.C. August 25, 1998) (discussion of various interpretations allowing payout in excess of $125); 1994 Op. S.C. Att’y Gen. No. 56 at 123.

If the Legislature had intended the interpretation advanced by Respondents then the adoption of language in the 1996-97 South Carolina state budget bill would not have been necessary. A portion of the budget bill adopted, but later vetoed, read in part:

I. Section 12-21-2791 of the 1976 Code, as added by Act 164 of 1993, is amended to read:

Section 12-21-2791. During a twenty-four hour period, a person is not permitted to win more than one hundred twenty-five dollars over and above the amount deposited in a coin-operated machine authorized under Section 12-21-2720(A)(3).

1996 Budget Bill, Part II §54I. This provision clearly advances the position of Respondents. If the current version of Section 12-21-2791 means a payout in excess of what is deposited into the machine, then there would be no need for the Legislature to amend the statute. The Legislature is presumed not to undertake a futile act. TNS Mills, Inc. v. S.C. Dept. of Revenue, 331 S.C. 611, 503 S.E.2d 471 (1998).

Based upon the reading of Section 12-21-2791, it is clear that Respondents violated the statutory provisions by exceeding the $125 maximum daily limit on payouts for credits on the Class III video game machine. The penalty provisions are discussed in the Conclusions of Law.

CONCLUSIONS OF LAW

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

1. The Administrative Law Judge Division has jurisdiction to hear this matter pursuant to S.C. Code Ann. § 21-4-30 (Supp. 1997) and S.C. Code Ann. § 1-23-600 (Supp. 1998).

 

2. The Department contends that the Respondents violated S.C. Code Ann. § 12-21-2791 (Supp. 1997). That section provides:

Any location which operates or allows the operation of coin-operated machines pursuant to Section 12-21-2720(A)(3) which provides payouts shall limit the cash payout for credits earned for free games to two thousand five hundred credits a player a location during any twenty-four hour period. The cash value of credits for each free game is limited to five cents.

3. The Department provided a publication entitled "A Guide to Conducting Video Gaming Establishments in South Carolina" to video poker operators. Among other things, this publication provides in pertinent part:

In determining the cash payout, it is irrelevant as to the amount of credits originally purchased by the player and as to the amount the player originally paid for each credit . . . . If a player has more than 2,500 credits remaining on a machine at the end of his or her play, those credits in excess of 2,500 are lost forever. The player may not receive a cash payout for those credits in excess of 2,500.

4. If a statute’s language is plain and unambiguous and conveys clear and definite meaning, there is no occasion for employing rules of statutory interpretation, and the court has no right to look for or impose another meaning. Miller v. Doe, 312 S.C. 444, 441 S.E.2d 319 (1994). In other words, "where a statute is complete, plain and unambiguous, legislative intent must be determined from the language of the statute itself." Whitner v. State, 328 S.C. 1, 492 S.E.2d 777, 779 (1997), cert. denied, 118 S.Ct. 1857 (1998).

5. "Legislative enactments are to be construed as they are written. . . ." Timmons v. South Carolina Tricentennial Comm’n, 254 S.C. 378, 402, 175 S.E.2d 805, 817 (1970), cert. denied, 400 U.S. 986 (1971).

6. In construing a statutory provision, where a particular construction would create an absurd result, another reasonable construction effectuating legislative intent should prevail. Kiriakides v. United Artists Communications Inc., 312 S.C. 271, 440 S.E.2d 364 (1994).

7. Interpreting S.C. Code Ann. § 12-21-2791 (Supp. 1997) to apply only to winnings above the initial cash deposit into a Class III video game machine would create an absurd and unworkable result. See Johnson v. Collins Entertainment Co., Inc., 3:97-2136-17 (D.S.C. August 25, 1998).

8. The legislature’s intent in enacting [Section 12-21-2791] is to prevent excessive gambling by limiting such cash payouts. Justice v. The Pantry, 330 S.C. 37, 45, 496 S.E.2d 871, 875 (Ct. App. 1998), reh’g denied March 19, 1998.

9. Construing the S.C. Code Ann. § 12-21-2791 (Supp. 1997) payout limitation to apply only to credits in excess of those purchased by a player does not support the purpose of the provision because the implied deterrent established by the General Assembly is that the public would limit the amount of money deposited in the machines knowing that upon cashing in their credits the most that could be paid by the video poker establishment is $125.00.

10. S.C. Code Ann. § 12-21-2791 (Supp. 1997) uses "credits earned" to mean "the credits the player has at the conclusion of play regardless of whether they are due to money the player put in or credits later won. . . ." Johnson v. Collins Entertainment Co., Inc., 333 S.C. 96, 508 S.E.2d 575 (1998).

11. Free games are those available "without additional cost" to the player. See Holliday v. Governor of State of South Carolina, 78 F. Supp. 918, 922 (W.D.S.C. 1948), aff’d, 335 U.S. 803 (1948); Alexander Amusement Co. v. State, 246 S.C. 530, 144 S.E.2d 718, 719 (1965) (an undercover agent "played the machines by depositing coins therein, accumulating a number of free games on each").

12. The Respondents violated S.C.Code Ann. § 12-21-2791 (Supp. 1997) by tendering cash payouts exceeding $125 in a twenty-four hour period on March 26 and 27, 1998.

13. The penalty for failure to comply with S.C. Code Ann. § 12-21-2791 (Supp. 1997) is a fine of not less than fifty dollars nor more than five hundred dollars for each failure. S.C. Code Ann. § 12-54-40(b) (Supp. 1997).

14. Section 12-54-40(b)(3) (Supp. 1997) provides:

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. For failure to obtain or display a license as prescribed in Sections 12-21-2720 and 12-21-2730, the penalty is fifty dollars for each failure to comply.

15. No coin-operated machine licensed under the provisions of Section 12-21-2720(A)(3) may be operated at a location unless the location is licensed pursuant to the provisions of Chapter 36 of Title 12. S.C. Code Ann. § 12-21-2703 (Supp. 1997).

16. As the Respondents were required to obtain a retail license to allow or operate Class III machines on the licensed premises, the penalty provisions of S.C. Code Ann. § 12-21-2703 (Supp. 1997) apply to the violations at issue.

17. Considering the confusion that has surrounded the interpretation of S.C. Code Ann. § 12-21-2791 and that this is the first violation against each of these locations, I find that the appropriate penalty under these facts and circumstances is $150.00 against each location.

ORDER

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

ORDERED, that each Respondent pay a $150 penalty to the South Carolina Department of Revenue for tendering cash payouts exceeding $125 in a twenty-four hour period in violation of S.C. Code Ann. § 12-21-2791 (Supp. 1997).

AND IT IS SO ORDERED.

________________________________

Marvin F. Kittrell

Chief Judge

May 11, 1999

Columbia, South Carolina.


Brown Bldg.

 

 

 

 

 

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