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). |