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. William D. Wheeler and Hot Spot Casino, Inc., d/b/a Hot Spot Casino, Inc., et al

AGENCY:
South Carolina Department of Revenue

PARTIES:
Petitioners:
South Carolina Department of Revenue

Respondents:
William D. Wheeler and Hot Spot Casino, Inc., d/b/a Hot Spot Casino, Inc., 2, 4, 8, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 26, 27, 28, 29, and 30
 
DOCKET NUMBER:
99-ALJ-17-0127-CC

APPEARANCES:
For the Petitioner: Nicholas P. Sipe, Esquire

For the Respondents: Douglas L. Hinds, Esquire
 

ORDERS:

FINAL ORDER AND DECISION

STATEMENT OF CASE

This matter comes before me upon Respondents' request for a hearing after being cited for violating the Video Game Machines Act (the Act), specifically, S.C. Code Ann. § 12-21-2804(A) (Supp. 1998). The South Carolina Department of Revenue (Department) contends that Respondents operated machines licensed pursuant to S.C. Code Ann. § 12-21-2720(A)(3) (Supp. 1998) (commonly referred to as "Class III" machines and licenses) in violation of Section 12-21-2804(A). A hearing was held before the Administrative Law Judge Division (Division or ALJD) on August 20, 1999.

FINDINGS OF FACT

Having observed the witnesses and exhibits presented at the hearing and closely passed upon their credibility, taking into consideration the burden of persuasion by the Parties, I make the following Findings of Fact by a preponderance of evidence:

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

2. On September 16, 1997, South Carolina Law Enforcement Division (Sled) Special Agent Williamson conducted an inspection of the video gaming establishments located in Hot Spot Casino (the Hot Spot) at 1918 Highway 17 North, Surfside, South Carolina. The location was a mall-type arrangement with all of the rooms opening into a commons area. Each room complied with the structural requirements of S.C. Code Ann. § 12-21-2804(A) (Supp. 1998).

There were eighteen employees upon the premises of the Hot Spot and twenty-three of the twenty-four game rooms were open. Each room contained Class III video game machines which were "on" and available for play. There were employees working in rooms 4, 6, 7, 9 and 26. The remaining rooms (room numbers 2, 8, 10 through 19, and 27 through 30) did not have a specific employee assigned to them. The thirteen employees not specifically working in a game room were free to move from room to room according to where the customers were situated and needed assistance. The Sled agents who inspected the Hot Spot did not observe any unassigned employee stay in any one room more than 1½ minutes.

The general manager of the location knew that it is the Department's "position" that an employee must be assigned to each room. However, he does not agree with that position in this case because he is appealing a previous charge against the Hot Spot for the same offense. To that end, the manager testified that after his previous violation, a Department employee informed him that he could "reopen until such case was heard." However, the manager was not told that he could operate in violation of the law until his case was heard.

3. Respondent William D. Wheeler d/b/a Hot Spot Casino, Inc., was the owner and business license holder for all of the businesses in the Hot Spot. The Class III machine licenses were also issued to Mr. Wheeler. The following Class III video game machine licenses were located in game rooms:

Hot Spot # 2

3806078

3806079

3806089

3929446

3929452

Hot Spot # 8

3929456

3929457

3929458

3929459

3929460

Hot Spot # 10

3806666

3806667

3806668

3806669

3806670

Hot Spot # 11

3929568

3929569

3929570

3929575

3929580 Hot Spot # 12

3806076

3806080

3806096

3929447

3929455

Hot Spot # 13

3806503

3806504

3806505

3806511

3929453

Hot Spot # 14

3806046

3806047

3806048

3806502

3929429

Hot Spot # 15

3929431

3929432

3929433

3929434

3929435

Hot Spot # 16

3806506

3806507

3806508

3806509

3806510

Hot Spot # 17

3806690

3929437

3929441

3929462

Hot Spot # 18

3806501

3806512

3806514

3929438

3929440

Hot Spot # 19

3806649

3929436

3929439

3929441

3929442

Hot Spot # 27

3929577

3929578

3929579

Hot Spot # 28

3806086

3806087

3806513

3806671

3929451

Hot Spot # 29

3806081

3806082

3806083

3806084

3806085

Hot Spot # 30

3806091

3806092

3806093

3806094

3806095 4. Following the inspection, Agent Williamson issued a violation report charging the Respondents with operating rooms 2, 8, 10 through 19, and 27 through 30 in violation of 27 S.C. Code Regs. § 117-190 (Supp. 1998) by not having "at least one separate employee on the premises during business hours." (1)

5. The Department seeks revocation of the Class III machine licenses located within the game rooms listed in paragraph three. The Department further seeks that this Division order that the Respondents be precluded from the use or operation of any Class III coin operated devices in each game room found in violation of § 12-21-2804(A) for a period of six months after the entry of an Order revoking the licenses. Finally, the Department seeks the imposition of a Five Thousand ($5,000) Dollar fine against both William D. Wheeler and the Hot Spot based on violations for each of the game rooms. Therefore, the Department seeks a fine of Eighty Thousand ($80,000) Dollars against both William D. Wheeler and Hot Spot Casino, Inc.

6. The evidence reflects facts that both mitigate and elevate the appropriate penalty in this case. The Respondents did not have an employee in game rooms 2, 8, 10 through 19, and 27 through 30. However, although the Hot Spot failed to maintain an employee on the premises of those game rooms, there were thirteen employees present on the premises of the Hot Spot assigned to service the sixteen game rooms. To the contrary, the Respondent, William Wheeler, has been disciplined for violating the Video Game Machines Act based on the same violation in this case at this exact location on at least three previous occasions.(2) I, therefore, find that the appropriate penalty in this case is a Five Thousand ($5,000) Dollar fine for each of the three rooms failing to have an employee present who could service the rooms and a Two Thousand Five Hundred ($2,500) Dollar fine for each of the remaining thirteen rooms in which the Respondent had employees available to service. Therefore, the total fine is Forty-Seven Thousand Five Hundred ($47,500) Dollars.

CONCLUSIONS OF LAW

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

General Conclusions

1. The Administrative Law Judge Division has jurisdiction to hear this matter pursuant to S.C. Code Ann. § 12-4-30 (D) (Supp. 1998) and S.C. Code Ann. § 1-23-320 (Supp. 1998).

2. The Department contends that the Respondents violated S.C. Code Ann. § 12-21-2804(A) (Supp. 1998). That section provides:



After July 1, 1994, the commission [Department] 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.



3. Machines licensed under Section 12-21-2720(A)(3) include video games with a free play feature operated by a slot in which a coin or thing of value is deposited. S.C. Code Ann. § 12-21-2720 (Supp. 1998).

4. S.C. Code Ann. § 12-21-2804(A) (Supp.1998) mandates that the Department "shall revoke the licenses in an establishment which fails to meet the requirements of this section." This section also mandates that the Department must not issue a license for a machine in an establishment in which a license has been revoked for a period of six months. The authority to issue a license is the power to revoke it. Feldman v. South Carolina Tax Commission, et al, 26 S.E. 2d 22 (1943).

Single Place or Premises

5. The Department contends that the Respondents violated 27 S.C. Code Regs. 117-190 (Supp. 1998) by failing to maintain an employee in each business. It is the Department's position that if an employee is not within the four walls of the business at the time of an inspection, the business is not a "single place or premises" as defined in Regulation 117-190. Therefore, the Department insists that the mere absence of an employee from the business constitutes conclusive proof that the owner violated the statute. The Department argues that this criterion is necessary to curtail casino-type operations in South Carolina. However, the Department cannot curtail such operations by violating the Respondents' due process rights or by applying fundamentally flawed reasoning. Furthermore, the Department's approval of multiple video game businesses under one roof created the very quagmire they seek to rectify by requiring that an employee remain within the four walls of each game room at all times.

The Act does not define the term "single place or premises." However, Regulation 117-190 requires that each business must have a separate employee on the premises while the business is open. The cardinal rule of statutory interpretation is to ascertain and effectuate the legislative intent wherever possible. Bankers Trust of South Carolina v. Bruce, 275 S.C. 35, 267 S.E. 2d 424 (1980). "Full effect must be given to each section of a statute, giving words their plain meaning, and, in the absence of ambiguity, words must not be added or taken away." Hartford Accident and Indem. Co. v. Lindsay, 273 S.C. 79, 254 S.E. 2d 301 (1979). Thus, the phrase "on the premises" presumptively must have meaning. However, in order to meet constitutional due process standards, a statute and, therefore, a regulation must give sufficient notice to enable a reasonable person to comprehend what is prohibited. State v. Crenshaw, 274 S.C. 475, 266 S.E. 2d 61, cert. denied, 449 U.S. 883, 101 S. Ct. 236, 66 L. Ed. 2d 108 (1980); Toussaint v. State Board of Medical Examiners, 303 S.C. 316, 400 S.E. 2d 488 (1991) (the constitutional standard for vagueness is the practical criterion of fair notice to those to whom the law applies). Furthermore, penal statutes must be strictly construed against the state in favor of the citizen. Feldman v. S.C. Tax Commission, 203 S.C. 49, 26 S.E. 2d 22 (1943). In that regard, Regulation 117-190 does not specifically state that if an employee is not on the premises at all times then a violation is presumed.

The Department's interpretation that an employee must physically remain within the four walls of each video game room at all times is based upon the presumption that all businesses maintain employees on the premises at all times; otherwise, the business is closed.(3) Therefore, the Respondent's business should have been closed, as each game room did not have an employee on the premises. Pursuant to that conclusion, the Department applies an irrebuttable or conclusive presumption that once the Department shows that an employee is not on the premises, that business does not qualify as a single place or premise.

Application of the proposition that the game rooms should be closed whenever an employee leaves the premises creates a bright line standard to follow in future cases. A bright line test certainly creates both clarity and a straightforward method of dealing with this issue. However, if the bright line standard is not clearly supported by unassailable facts, it becomes a standard of convenience that is simply not supported by due process. "This Court has no legislative powers. In the interpretation of statutes our sole function is to determine and, within constitutional limits, give effect to the intention of the legislature. We must do this based upon the words of the statute itself. To do otherwise is to legislate, not interpret. The responsibility for the justice or wisdom of legislation rests exclusively with the legislature, whether or not we agree with the laws it enacts." Busby v. State Farm Mut. Auto. Ins. Co., 280 S.C. 330, 312 S.E. 2d 716 (S.C. App. 1984).

To declare the existence of a presumption of fact, the court must determine that "the result presumed must be one which a reasonable person would draw from certain facts which have been proven to him. Its basis is logic [sic], its source is probability, and it rests on the observed connection between facts." Lawrence v. Southern Ry., 169 S.C. 1, 167 S.E. 839 (1933). I do not find support in the general knowledge of how businesses are conducted, that all businesses, especially those in a "mall-type" setting, close every time an employee steps out of the business. It is foreseeable that an employee of a business in a mall-type setting could step out of the business momentarily to service a customer's needs or for some business or personal reason.

If the Department's evidence shows that no employee was working within the four walls of the Respondent's business, the Department has established a prima facie case or a rebuttable presumption that the business is not a "single place or premises." The rebuttable presumption is supported by the general knowledge that businesses do not operate for any extended period of time without their employees present. Additionally, an employee's role and on-the-job conduct is within the Respondent's control. Therefore, once the Department establishes a prima facie case, the burden shifts to the Respondent to produce evidence that the business actually had a separate employee specifically assigned to that business. See, Stanley Smith & Sons v. D.M.R., Inc., 307 S.C. 413, 415 S.E. 2d 428 (Ct. App. 1992). Furthermore, the Respondent must demonstrate that the employee's absence from the game room was of short duration and was reasonable under the circumstances. A violation of Regulation 117-190 will still occur whenever an employee is absent from the premises for a prolonged period of time, or the reason(s) for the absence do not involve a reasonable business or personal need. Such determinations will depend on the specific factual circumstances, and must be evaluated on a case-by-case basis.

Upon application of the above analysis, the Department proved that no employee was working within the four walls of game rooms 2, 8, 10 through 19, and 27 through 30. Therefore, the Department established a prima facie case that those businesses were not being operated as a "single place or premises." Since the Department established a prima facie case, the burden shifted to the Respondent to produce evidence that the business actually had a separate employee specifically assigned to that business and that if the employee was absent from the game room, the absence was of short duration and was reasonable under the circumstances. The Respondent failed to prove that a separate employee was properly absent from game rooms 2, 8, 10 through 19, and 27 through 30 for the above reasons.







Determination of Premises Subject to a Fine

6. South Carolina Code Ann. § 12-21-2804(A) sets forth that no person may lawfully operate as a "single place or premises" if that location has more than five machines. In this instance, the Respondent, by not having an employee upon the premises, failed to comply with Regulation 117-190. Since the business did not comply with Regulation 117-190, it was not a lawful "single place or premises." Before the passage of Regulation 117-190, parties debated whether a structure could have more than five machines under one roof. Regulation 117-190 settled that issue by authorizing multi-game room locations, but only if the game rooms were constructed as authorized by the regulation. Regulation 117-190 provides that "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." The game rooms are required to have a separate electric utility meter; at least one separate employee on the premises during business hours; a separate local business license where required; and a separate state sales tax license. Furthermore, the game rooms cannot be connected but must have a "commons area" from which game rooms can open into via doorways. In other words, structures are permitted to have more than five machines only if each of the game rooms maintain the trappings of an individual business, as provided in Regulation 117-190.

The Respondent contends that if the game rooms are not in compliance with the regulation, then they are not individual single place or premises. Therefore, since a violation of S.C. Code Ann. § 12-21-2804(A) is based upon having more than five machines upon a "single place or premises," then the machines in those game rooms must be combined with all other machines within the structure that are not lawful "single place or premises" when determining the appropriate monetary fine. See, S.C. Department of Revenue v. Quick Foods, Inc., et al. 99-ALJ-17-0159-CC. However, the logical extension of the Respondent's argument would result in all the game rooms within the structure being in violation of Regulation 117-190. As stated above, game rooms "may not have any windows, doors or other openings leading to another area where video game machines are located." Therefore, if the game room ceases to be an independent business ("single place or premises") and the machines within that room are attributed to the remaining area of the structure, there would be no commons area. Consequently, the fine would be limited to Five Thousand ($5,000) Dollars. Nevertheless, since the game rooms would then open into an area with other game rooms, every game room within the location would fail to be a "single place or premises" even if the owner of that room had made every effort to comply with the law. As a result, within a multi-game room structure, a game room owner's business would depend on compliance with the regulation by others over whom the owner has no control. Likewise, an individual who owns all of the rooms and has made every effort to operate the business independently but who has one employee fail to comply with Regulation 117-190, could, as a result of that one employee's unlawful action, have all of the licenses revoked and the entire structure closed for six months. As a general rule, courts reject a construction of words used in a statute when acceptance of a statutory interpretation would lead to a result so absurd that it could not possibly have been intended by the legislature or would defeat the plain legislative intent. Kiriakides v. United Artists Communications, Inc., 312 S.C. 271, 440 S.E. 2d 364 (1994) [citing Stackhouse v. Rowland, 86 S.C. 419, 68 S.E. 561 (1910) (courts will reject the plain and ordinary meaning of words used in a statute when to accept it would lead to a result so absurd that it could not possibly have been intended by the legislature or would defeat the plain legislative intention)].

Furthermore, the Respondent's argument neglects the fact that multi-game rooms are individual businesses operating within an approved structure. Structures with multi-game rooms are by their very nature structures that house more than five machines upon the premises. These structures are a creature of the regulation itself that authorizes more than five machines within a structure.(4) The operation of those "single place or premises" businesses/game rooms is permitted only if the game rooms comply with the strict tenements of Regulation 117-190 businesses/game rooms. In other words, the operation of these businesses are permitted only if each of the businesses maintains the trappings of an individual business as provided in Regulation 117-190. Failure to comply with those tenements at a multi-game room location is tantamount to having more than five machines in a single place or premise.





Six Month Prohibition

7. The Department contends that no Class III video game machines should be allowed to operate in game room numbers 2, 8, 10 through 19, and 27 through 30 for a period of six months from the effective date of the revocation of the Respondent's licenses. The role of the court in statutory interpretation is limited to seeking to effectuate the legislature's intent. Laird v. Nationwide Ins. Co., 243 S.C. 388, 395 S.E. 2d 206 (1964). In statutory interpretation, courts must read the statute in a manner that harmonizes it with its subject matter and is in accordance with its general purpose. Multi-Cinema, Ltd. v. South Carolina Tax Comm'n, 292 S.C. 411, 357 S.E. 2d 6 (1987). Plain and unambiguous language in a statute that conveys a clear and definite meaning should not be altered or redefined by the judiciary. Paschal v. State Election Comm'n, 317 S.C. 434, 454 S.E. 2d 890 (1995). However, if a statute is ambiguous, courts must ascertain legislative intent through statutory construction. See Abell v. Bell, 229 S.C. 1, 91 S.E. 2d 548 (1956). An ambiguity arises when the language of a statute is capable of being understood by reasonably well-informed persons in either of two or more senses. Southeastern Fire Ins. Co. v. South Carolina Tax Comm'n, 253 S.C. 407, 171 S.E. 2d 355 (1969).

The Video Game Machines Act became effective on July 1, 1993. The Act provides the framework for the licensing and operation of various video game machines and locations in the State of South Carolina. At that time, the Act was directed at the regulation of the ever-growing gambling industry in this state. Justice v. The Pantry, et al., Opinion No. 2787 (S.C. January 26, 1998).

Section 12-21-2804(A) of the Act provides, in relevant part:



(A) . . . The commission shall revoke the licenses of machines located in an establishment which fails to meet the requirements of this section. 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 . . . .



(emphasis added). This language has produced two varying interpretations. One interpretation, commonly referred to as the "dead location" approach, is that once a license has been revoked for a machine within an establishment, no Class III machines may be maintained at that location for six months from the date of revocation. The alternative interpretation, the "dead machine" approach, maintains that no license should be reissued on specific machines for six months after a Class III license has been revoked on those machines.

These differing interpretations result from the legislature's usage of the phrase "a machine" in the six-month penalty provision. As an indefinite article, "a" may refer to a specific object or thing. See Black's Law Dictionary 1 (6th ed. 1990). However, the article is "often used in the sense of 'any' and is then applied to more than one individual object." Id. Therefore, interpreting this statute in a manner that harmonizes it with its subject matter and is in accordance with its general purpose, the relevant portion of § 12-21-2804(A) is best read to state that "[n]o license may be issued for [any] machine in an establishment in which a license has been revoked."

Additionally, the "dead machine" approach should not be adopted because doing so would make § 12-21-2804(A) internally inconsistent. Courts reject a construction of words used in a statute when acceptance of a statutory interpretation would lead to a result so absurd that it could not possibly have been intended by the legislature or would defeat the plain legislative intention. See Kiriakides, Supra. The clear language of Section 12-21-2804(A) grants the Department the authority to revoke any licenses at an establishment found in violation of the requirements of the statute.

The Department does not issue video game machine licenses for specific locations. Instead, licenses are issued to individuals for machine ownership. Therefore, meaningful punishment of the licensee for failure to comply with the statute is best effectuated through revocation of the machine licenses. Under § 12-21-2804(A), a machine license must be revoked by virtue of its misuse at a particular establishment, whether the actual violator is the licensee, machine owner, or lessee. Although machine owners may seek relicensure of the machines, they incur significant costs in doing so. First of all, the machine owner must pay the fee for licensure in accordance with S.C. Code Ann. § 12-21-2728(A) (Supp. 1998). Secondly, the owner must find another location for machine placement and develop a clientele without advertising the machine's existence at the new location.(5)

The statute also curtails violations of the Act by requiring that the place where the violation occurred cease operations for six months. The legislature probably envisioned that licenses would be issued for video poker machines at specific establishments. However, the practical effect of the "dead machine" approach, as the Department currently licenses video poker activity, would be to exact an additional penalty for violation of the Act upon the machine owner alone, although the owner may not have been the actual violator. Punishment against the operators of the establishment would be virtually meaningless. Owners of establishments would be able to buy or lease new machines, purchase new licenses and resume operations at the same location (benefitting from the same patrons) almost immediately, having only suffered replacement costs and usage losses for the affected machines during the revocation period. The operators of the establishments, who potentially may possess greater culpability, could escape any punishment pursuant to the "dead machine" approach. The legislature surely did not intend such an absurd result.

Furthermore, it would be impossible, as a practical matter, for the Department to enforce the penalty provision of Section 12-21-2804(A) under the "dead machine" approach. The Department has elected to issue licenses that may be attached to any machine at any location. The "dead machine" approach would necessitate that the Department track machines that are readily movable by serial number to make sure that no "dead machine" was being operated at any given location.

Proponents of the "dead machine" approach argue that the legislature would have provided for a six-month revocation of the "establishment license" if it intended to impose a "location" penalty. If the Department issued video gaming licenses for specific establishments, application of this provision would be simple. However, the Department does not issue a specific "establishment license" other than retail licenses pursuant to S.C. Code Ann. § 12-36-510 (Supp. 1998).(6) Moreover, video game machines are usually placed in establishments that conduct business activities other than video games. Therefore, revocation of a retail license could impose a greater punishment upon an establishment than intended by the legislature by precluding all retail activities, not just video games. The only practical way to curtail violations of the Act at a given location is to revoke the licenses of machines in the establishment and refuse to license any machines at that location for a fixed period of time.

I therefore find that Section 12-21-2804(A) requires that no Class III video game machines should be allowed to operate at a location found in violation of that section for a period of six months from the effective date of the revocation of the licenses in the location.

License Revocations

8. The Respondent contends that since the Class III licenses expired before the hearing into this matter, this Court does not have jurisdiction to revoke nonexistent licenses. However, I find that the video game machine licenses are a statutorily granted privilege that may be revoked regardless of whether the licenses exist. Patel v. Kansas State Board of Healing Arts, 22 Kan. App. 2d 712, 920 P.2d 477 (1996).(7)

Fines

9. The Respondent contends that Revenue Procedure 97-2 previously provided that the Department would levy only one Five Thousand ($5,000) Dollar fine at multi-game room locations in which more than one game room was found in violation of the "single place or premises" provisions of the Video Game Machines Act. He further contends that the adoption of Revenue Procedure 99-1 resulted in a change of the Department's position which allowed a Five Thousand ($5,000) Dollar fine for each game room found in violation. That change, the Respondent argues, violates his right to due process. In support of that contention, the Respondent presented United States Supreme Court decisions United States v. Penn Industrial Chemical Corporation, 411 U.S. 655 (1972), Cox v. State of Louisiana, 379 U.S. 559 (1965), and Raley v. Ohio, 360 U.S. 423 (1959). In each of these cases the criminal defendants purportedly relied upon assertions by government agents or publications. However, in this case the Respondent did not sufficiently establish that he operated his business in reliance upon a position by the Department that only one Five Thousand ($5,000) Dollar fine would be levied for a violation by several game rooms at a multi game room location.

Moreover, Revenue Procedure 99-1 clearly sets forth that it is only a guideline (as did previous Revenue Procedure 97-2) and that it supersedes all Procedures in conflict with its provisions. Furthermore, there does not appear to be a conflict between Revenue Procedure 97-2 and Revenue Procedure 99-1. Both of these Procedures set forth that "a single violation of $5,000 will be written per single place or premises." Revenue Procedure 97-2 sets forth that "[a] $5,000 penalty will be sought for each license holder (machine owner) and location operator on the premises." Whereas, Revenue Procedure 99-1 provides states:



A $5,000 penalty will be sought from each machine license holder (machine owner) for each single place or premises failing to meet the requirements as a single place or premises and a $5,000 penalty will be sought from each location operator for each single place or premises failing to meet the requirements as a single place or premises.



Revenue Procedure 97-2 does not state that a fine will not be sought for each game room found in violation. Rather, Revenue Procedure 97-2 simply does not address the issue. However, Revenue Procedure 99-1 specifically sets forth that a Five Thousand ($5,000) Dollar fine will be sought for each single place or premises found in violation.

10. The Department seeks a fine of Eighty Thousand ($80,000) Dollars against both William D. Wheeler and Hot Spot Casino, Inc. S.C. Code Ann. § 12-21-2804(F) (Supp. 1998) provides that a "person" who violates Section 12-21-2804(A) may be fined up to Five Thousand ($5,000) Dollars. In this case, Mr. Wheeler holds the Class III machine licenses and operates the Hot Spot location. Section 12-21-2804 does not require that both the license holder and the location operator receive separate and distinct fines. Rather, Section 12-21-2804 requires that each "person" who violates the statutes is subject to a fine.(8) As previously set forth, penal statutes must be strictly construed against the state in favor of the citizen. Feldman v. S.C. Tax Commission, 203 S.C. 49, 26 S.E. 2d 22 (1943). Therefore, in this instance, fining Mr. Wheeler as both a license holder and location operator would result in two fines against the same "person" for the same offense.

It is a generally recognized principle of administrative law that the fact-finder has the authority to impose an administrative penalty after the parties have had an opportunity to have a hearing and be heard on the issues. See Ohio Real Estate Comm'n v. Aqua Sun Investments, 655 N.E. 2d 266 (Ohio 1995); Shadow Lake of Noel, Inc. v. Supervisor of Liquor Control, 893 S.W. 2d 835 (Mo. App. S.D. 1995); Matter of Henry Youth Hockey Ass'n, 511 N.W. 2d 452 (Minn. App. 1994); Vermont Agency of Natural Resources v. Duranleau, 617 A.2d 143 (Vt. 1992); City of Louisville v. Milligan, 798 S.W. 2d 454 (Ky. 1990); Com., Dept. of Transp. v. Slipp, 550 A.2d 838 (Pa. 1988); Dept. of Transp. v. Miller, 528 A.2d 1030 (Pa. 1987); State Police v. Cantina Gloria's, 639 A.2d 14 (Pa. 1994).

Prior to governmental restructuring, a Commission, sitting in its adjudicatory capacity, imposed penalties for violations of statutory provisions administered by the Commission's subordinate agency. In its capacity as the fact-finder, the Tax Commission would conduct an adjudicatory hearing in all contested cases arising under Title 12 of the South Carolina Code, and would issue an order containing findings of fact and conclusions of law. As the fact-finder, it was the Commission's prerogative "to impose the appropriate penalty based on the facts presented." Walker v. South Carolina ABC Comm'n, 305 S.C. 209, 407 S.E. 2d 633 (1991). With the advent of restructuring and the abolition of the Tax Commission, however, the Administrative Law Judge Division was given the authority to hear "all contested cases, as defined by Section 1-23-310 and as previously considered by the three [tax] commissioners. . . ." S.C. Code Ann. Section 12-4-30(D) (Supp. 1998). The Administrative Law Judge, as the current fact-finder, must also impose a penalty based on the facts presented at the contested case hearing. Parties are entitled to present evidence on all issues arising out of the contested agency action and the tribunal responsible for conducting the contested case proceedings has the authority to decide the issues based on the facts presented and to make the final decisions on all the issues, including the appropriate penalty.



ORDER

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

ORDERED that the licenses listed above in paragraph three of the Findings of Fact are revoked, and that a fine of Forty-Seven Thousand Five Hundred ($47,500) Dollars is imposed upon William D. Wheeler d/b/a Hot Spot Casino, Inc.

IT IS FURTHER ORDERED that no Class III machines shall be operated in any of the above game rooms listed above in paragraph three of the Findings of Fact (room numbers 2, 8, 10 through 19, and 27 through 30) for a period of six months from the date of this Final Decision.

AND IT IS SO ORDERED.





___________________________

Ralph King Anderson, III

Administrative Law Judge





January 11, 2000

Columbia, South Carolina

1. The Department originally determined that Respondents did not have an employee in game rooms 4 and 26. However, after reviewing this case, the Department stipulated that an employee was upon the premises of both rooms 4 and 26.

2. South Carolina Department of Revenue v. Will D. Wheeler, Hot Spot Casino, Inc., and P. I. Leasing and Management, Inc., 1918 Highway 17 South, Surfside Beach, S.C., Docket No. 98-ALJ-17-0365-CC (Respondent agreed to pay a fine in the amount of $15,000 to resolve a contested case); South Carolina Department of Revenue v. Will Wheeler, Robert Hills, Hot Spot Casino, Inc., and P.I. Leasing and Management, Inc., 1918 Highway 17 South, Surfside Beach, S.C., Docket No. 97-ALJ-17-0641-CC (each Respondent fined $15,000); South Carolina Department of Revenue v Will D. Wheeler, Hot Spot Casino, Inc., P.I. Leasing and Management, Inc., Robert Hills, Oscar Tysinger, III, and Richard McComas, 1918 Highway 17 North Business, Surfside Beach, S.C., Docket No. 97-ALJ-17-0418-CC (Respondent fined $2,000.00); and South Carolina Department of Revenue and Taxation v. Will D. Wheeler, d/b/a Hot Spot, 1918 Highway 17 Bus., Surfside Beach, SC, Docket No. 95-ALJ-17-0169-CC

3. If the Department's reasoning is not based upon the premise that all businesses maintain employees on the premises at all times or otherwise the business is closed, then their reasoning is flawed. If all businesses do not close when an employee leaves the premises, their conclusion is based upon the premise that some or most businesses maintain employees on the premises at all times or otherwise the business is closed. Creation of an irrebuttable presumption based upon historical facts that sustain that presumption only under some, but not all, of the possible circumstances, would be fundamentally unfair.

4. Before the passage of Regulation 117-190, party's debated whether a structure could have more than five machines under one roof. Regulation 117-190 settled that issue by authorizing multi-game room locations but only if the game rooms complied with the requirements of Regulation 117-190.

5. S.C. Code Ann. § 12-21-2804(B) (Supp. 1998) forbids the advertisement of the availability of video gaming machines.

6. S.C. Code Ann. § 12-21-2784 (Supp. 1998) provides that "[e]ach machine . . . operator, and licensed establishment must be licensed by [the Department] pursuant to Article 19 of this chapter and this article before a machine . . . is placed for public use in this State." S.C. Code Ann. § 12-21-2772(4) (Supp. 1998) defines "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." The Department interprets this section as simply requiring a sales tax license. Therefore, there is no "establishment license" to revoke.

7. See also, 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); and 51 Am. Jur. 2d Licenses and Permits § 83 (1970).

8. Though S.C. Code Ann. § 12-21-2804 provides that "no person" shall permit the operation of more than five machines upon any "single place or premises," an individual may operate as more than one person in the business context. The penalty for violating the Video Game Machines Act is found under S.C. Code § 12-21-2804(F) (Supp. 1998) which sets forth, in part:



A person violating subsections (A), (B), (D), or (E) of this section is subject to a fine of up to five thousand dollars to be imposed by the commission....The commission shall revoke the licenses of any person issued pursuant to the provisions of Article 19 of this chapter for a violation of subsection (C) of this section."



(Emphasis added). Although the Video Game Machines Act found under Article 20 of Title 12 does not define the term "person," I find the definition of "person" in Article 17 of Title 12 of the S.C. Code to be persuasive. That definition sets forth: "The word person means individual, partnership, corporation, association, or organization of any kind whatsoever." S.C. Code Ann. § 12-21-2410(3) (Supp. 1998). Also, Black's Law Dictionary defines "person" as:



In general usage, a human being (i.e. natural person), though by statute term may include labor organizations, partnerships, associations, corporations, legal representatives, trustees, trustees in bankruptcy, or receivers. Black's at 1142 (6th ed. 1990).



Furthermore, "A corporation is regarded as a "person" within the contemplation of law....within the meaning of contract and statutory or constitutional provisions, if it is within the reason and purpose of such provisions and is not expressly or impliedly excluded from their operation...." 18 C.J.S. Corporations § 3 (1990) (emphasis added).


Brown Bldg.

 

 

 

 

 

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