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. Quick Foods, Inc. d/b/a Gamexpress Amusements, et al

AGENCY:
South Carolina Department of Revenue

PARTIES:
Petitioners:
South Carolina Department of Revenue

Respondents:
Quick Foods, Inc. d/b/a Gamexpress Amusements, and Jungle Golf of Windy Hill, Inc., d/b/a Hi Roller, Jack Potts, Diamonds, Annie Up, Red Chips, and Dubble Down
 
DOCKET NUMBER:
99-ALJ-17-0159-CC

APPEARANCES:
Petitioners & Representative: South Carolina Department of Revenue, Carol I. McMahan

Respondents & Representative: Quick Foods, Inc. d/b/a Gamexpress Amusements and Jungle Golf of Windy Hill, Inc., d/b/a Hi Roller, Jack Potts, Diamonds, Annie Up, and Red Chips, James M. Griffin

Parties Present: All Parties Present
 

ORDERS:

FINAL ORDER AND DECISION

I. Statement of the Case



The South Carolina Department of Revenue (DOR) seeks to impose $60,000 in fines ($30,000 fine each against Gamexpress Amusements (Gamexpress) and Jungle Golf of Windy Hill, Inc. (Jungle Golf)) due to an alleged violation of the five machine limit imposed by S.C. Code Ann. § 12-21-2804(A) (Supp. 1998). Further, DOR seeks the revocation of thirty Class III machine licenses and the prohibition on the used of any Class III licenses at the location for a period of six months. Gamexpress, as the machine owner, and Jungle Golf, as the location owner, oppose DOR's position and request an order dismissing DOR's assessments, prohibiting DOR's revocation of the licenses, and prohibiting DOR from denying the operation of Class III machines at the subject location for 6 months.



This disagreement places jurisdiction in the Administrative Law Judge Division (ALJD). S.C. Code Ann. §§ 12-60-1310, 12-60-1320, 1-23-600 (Supp. 1998). The hearing in this matter was held June 23, 1999 at the Edgar Brown Building, Columbia, South Carolina. Based upon the evidence and the argument presented by the parties, a fine of $2,500 is imposed against Gamexpress and a fine of $5,000 is imposed against Jungle Golf. The thirty Class III machine licenses held by Gamexpress are revoked effective as of the date of this order and those machines shall not be licensed for a period of six months from the date of this order. Finally, Gamexpress shall provide DOR with the serial numbers of the thirty machines involved in this matter so that DOR may adequately enforce the six month non-licensure period.



II. Issues



1. Given the admission that a violation of the five machine limit of S.C. Code Ann. § 12-21-2804(A) (Supp. 1998) occurred, are all thirty of Gamexpress's licenses subject to revocation despite Gamexpress's lack of intention or knowledge relative to the violation?(1)



2. Given that a violation of the five machine limit of § 12-21-2804(A) occurred, do the revocation provisions of § 12-21-2804(A) apply to Gamexpress and Jungle Golf or is revocation required only for a violation of the now unconstitutional requirement that the primary and substantial portion of the establishment's gross proceeds must be from a source other than the Class III machines?



3. Given that a violation of the five machine limit of § 12-21-2804(A) occurred, are Gamexpress and Jungle Golf denied the use of any Class III machines at the location for a period of six months from the time the revocation becomes final or are Gamexpress and Jungle Golf denied the privilege of using the thirty machines for a period of six months from the time the revocation becomes final?



4. Given that a violation of the five machine limit of § 12-21-2804(A) occurred, is Gamexpress as the machine owner not liable for a penalty due to having no involvement in the management affairs of the location?



5. How many violations of the five machine limit of § 12-21-2804(A) were committed by Gamexpress and Jungle Golf and what is the amount of the fine resulting from each violation?





III. Analysis



A. Revocation: Lack of Knowledge



1. Positions of Parties



Gamexpress argues that as a machine owner, it knew nothing of the five machine limit violations in this case since the location operator had responsibility for the game rooms in question. Thus, Gamexpress argues that it cannot have its licenses revoked. DOR argues that since a violation of S.C. Code Ann. § 12-21-2804 has been established, a revocation of all machines at the location is required. DOR asserts that the violation is not dependent upon scienter and that a lack of knowledge by Gamexpress is no defense.



2. Findings of Fact



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



a. Background Facts



Gamexpress holds several licenses for Class III video game machines, with thirty of those licenses utilized at 4403 Highway 17 South, North Myrtle Beach. The building at the North Myrtle Beach address contains a video game business in a mall-type structure housing six video game rooms with five Class III licenses utilized in each room. Jungle Golf holds six retail sales tax licenses for the six video game rooms. The game rooms have the following names and house the following machines:



Hi Roller 3931561, 3931562, 3931563, 3931564, and 3931565

Jack Potts 3931555, 3931556, 3931558, 3931559, and 3931560

Diamonds 3931518, 3931519, 3931520, 3931544, and 3011174

Annie Up 3931513, 3931514, 3931515, 3931516, and 3931517

Red Chips 3931509, 3931510, 3931511, 3931512, and 3011171

Dubble Down 3931506, 3931507, 3931508, 3011172, and 3011173

On September 17, 1998, SLED conducted an inspection of the video game businesses at the North Myrtle Beach address. The inspection included walking into each area, listing the license numbers for machines located in the six game rooms, taking photographs of the location, examining the business licenses, retail tax licenses, and utility meters for the location, and talking to an employee at the location.



The SLED agents found no separate employee in any of the six game rooms. As a result, the SLED Agents issued a citation against Gamexpress and Jungle Golf for violating S.C. Code Ann. § 12-21-2804(A) due to operating more than five machines in a single place or premises.(2) As a result of the violation, DOR seeks revocation of the licenses on all thirty machines.



Of the thirty machines found in violation, all are owned by Gamexpress and all are housed in the game rooms owned by Jungle Golf. Gamexpress has no management control of any employee working for Jungle Golf and Jungle Golf exercises day-to-day management control over employees at its six game rooms.



3. Conclusions of Law



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



a. Statutory Requirements for Revocation



DOR "shall revoke the licenses of machines located in an establishment which fails to meet the requirements of this section." S.C. Code Ann. § 12-21-2804(A) (Supp.1998). Here, the establishment exceeds the five machine limit for a single place or premises. Accordingly, the machine licenses located therein must be revoked.



b. Lack of Knowledge



Gamexpress's lack of knowledge of the employee arrangements is not a basis for denying the revocation. The General Assembly did not impose a duty of finding the violator had any degree of intention such as "knowingly," "intentionally" or "willfully." Moreover, the General Assembly has demonstrated that when it wanted to impose scienter as a part of a violation it did so by specific language. See S.C. Code Ann. §12-21-2804(F) (upon a determination that a violation is wilful, criminal prosecution may be pursued). Since the statutory language does not impose knowledge as a requirement, none can be added.



Instead of an intention to violate the law, all the statute demands is proof that licenses for more than five machines are being maintained at a single place or premises. Accordingly, the fact that Gamexpress did not know the employees were not within the confines of the game rooms does not halt the imposition of the revocation of all thirty machines. Thus, Gamexpress's licenses for the thirty Class III machines in the retail locations known as Hi Roller, Jack Potts, Diamonds, Annie Up, Red Chips, and Dubble Down are revoked. S.C. Code Ann. § 12-21-2804(A)(Supp. 1998).









B. Revocation: Gross Proceeds



1. Positions of Parties



Gamexpress and Jungle Golf argue that revocation is not authorized by statute. Rather, they assert that the revocation applies only to the requirement that the primary and substantial portion of the establishment's gross proceeds must be from a source other than the Class III machines. Such being the case, they further argue that the "gross proceeds" provision was declared unconstitutional by Reyelt v. South Carolina Tax Commission, 6:93-1491-3 and 6:93-1493-3 (U.S. Dist. Ct., Greenville, S.C., Nov. 15, 1993) and therefore, the revocation provision cannot apply to them. DOR disagrees and argues that the revocation provision is triggered by any violation of the five machine limit.



2. Findings of Fact



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



A violation of the five machine limit occurred at Jungle Golf's location on September 17, 1998. Of the thirty machines found in violation, all are owned by Gamexpress and all are housed in the game rooms owned by Jungle Golf. Gamexpress has no management control of any employee working for Jungle Golf and Jungle Golf exercises day-to-day management control over employees at its six game rooms.



3. Conclusions of Law



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



a. Statutory Requirements for Revocation



As explained previously in this decision DOR "shall revoke the licenses of machines located in an establishment which fails to meet the requirements of this section." S.C. Code Ann. § 12-21-2804(A) (Supp.1998). In this case, the evidence demonstrates that the establishment exceeds the five machine limit for a single place or premises. Accordingly, in the absence of any overriding statutory language, the machine licenses must be revoked.



Gamexpress and Jungle Golf argue that overriding language does exist. In their view, other language of § 12-21-2804(A) (Supp. 1998) was designed to impose a revocation only if "the primary and substantial portion of the establishment's gross proceeds" is from the Class III machines. They then argue that since the gross proceeds provision was declared unconstitutional by Reyelt v. South Carolina Tax Commission, 6:93-1491-3 and 6:93-1493-3 (U.S. Dist. Ct., Greenville, S.C., Nov. 15, 1993), no authority remains for revoking the licenses. I cannot agree.



The plain language of the statute explains that a revocation will result when "the licenses of machines located in an establishment . . . [fail] to meet the requirements of this section." S.C. Code Ann. § 12-21-2804(A) (Supp.1998) (emphasis added). Thus, the statute's use of the plural word "requirements" obviously means the licensee must meet more than one requirement. Accordingly, the failure to satisfy any requirement invokes the revocation. See Emerson Elec. Co. v. Wasson, 287 S.C. 394, 339 S.E.2d 118 (1986) (the legislature's use of the plural "taxpayers" instead of "taxpayer" indicates more than one).



Here, at least two requirements are addressed in the subsection imposing the revocation. The first requirement is the five machine limit. S.C. Code Ann. § 12-21-2804(A) (Supp.1998). The second requirement is the gross proceeds requirement. S.C. Code Ann. § 12-21-2804(A) (Supp.1998). Thus, even treating the gross proceeds requirement as no longer a part of the law, a failure to satisfy the five machine limit still triggers the revocation. Accordingly, Gamexpress's thirty licenses must be revoked.



C. Six Month Prohibition



1. Positions of Parties



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



2. Findings of Fact



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



Gamexpress placed thirty Class III machines in six game rooms known as Hi Roller, Jack Potts, Diamonds, Annie Up, Red Chips, and Dubble Down. At the time of the inspection on September 17, 1998, Jungle Golf operated the location housing the thirty machines and held retail licenses issued by DOR pursuant to Chapter 36 of Title 12 of the S.C. Code. At the time of the inspection, all six game rooms were licensed establishments.



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



3. Conclusions of Law



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



A. Prohibition Applicable to Machines or to Location



1. Introduction



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



No license may be issued for a machine in an establishment in which a license has been revoked for a period of six months from the date of the revocation.



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



2. Legislative Intent



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



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



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



a. Plain Meaning



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



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



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



When relying upon the plain meaning of words in a statute, the words must be applied without resorting to a subtle or forced construction to limit or expand the statute's operation. Stephen v. Avins Constr. Co., 324 S.C. 334, 478 S.E.2d 74 (Ct. App. 1996). The interpretation expressed above provides a plain, unforced reading that answers an obvious need raised by the revocation language. Obviously, to make the revocation meaningful, a fixed period is needed. Otherwise, the owner would be able to acquire a new license the same day as the revocation and begin operating the same machine almost immediately. In my view, the six month period simply tells the owner that the machine is dead for six months and serves to give teeth to the revocation of the machine license.(3)



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



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



b. Statutory Construction



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



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



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



Additionally, Article 20 imposes a further license beyond the establishment license required by Article 19. Specifically, Article 20 requires a location license since "[e]ach . . . licensed establishment must be licensed by [DOR] pursuant to Article 19 of this chapter and this article before a machine . . . is placed for public use in this State."(4) S.C. Code Ann. § 12-21-2784 (Supp. 1998) (emphasis added). The location license of Article 20 is identified as an "establishment license for machine placement." S.C. Code Ann. § 12-21-2788 (Supp. 1998). In fact, DOR is required to revoke "an establishment license for machine placement" when the placement of machines does not meet "the provisions of Article 19 of this chapter and the [corresponding] rules and regulations promulgated by [DOR]." Id.; S.C. Code Ann. § 12-21-2786 (Supp. 1998). (5) Again, the General Assembly could have easily penalized the location by revoking the establishment license for machine placement.



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



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



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



c. Deference To Agency



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



i. Consistently Applied Position



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



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



ii. Deference To DOR's Position



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



-- Plain Meaning



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



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



-- Ambiguous Meaning



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



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



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



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



iii. Compelling Reasons



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

D. Applicability of Penalty to Machine Owner



1. Positions of Parties



DOR asserts that a fine of $30,000 is due from Gamexpress, the holder of the machine licenses. Gamexpress argues it is not liable for a penalty since, as a machine owner, it had no part in violating the five machine limit. In response to Gamexpress's argument, DOR asserts that a violation of S.C. Code Ann. § 12-21-2804 has been established and that a fine is imposed on the license holder. Further, the fine is not dependent upon a showing of scienter or that knowledge of the violation was present in Gamexpress.



2. Findings of Fact



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



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



3. Conclusions of Law



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



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



a. Persons Liable



The person liable for the fine is the "person violating" section 12-21-2804(A). S.C. Code Ann. § 12-21-2804(F) (Supp. 1998). For periods beginning after July 1, 1994 (as is the case in this matter), the person violating § 12-21-2804(A) is the one who "maintain[s] any licenses or permits for more than five machines authorized under Section 12-21-2720(A)(3) at a single place or premises."(6) S.C. Code Ann. § 12-21-2804(A) (Supp. 1998). Persons maintain licenses for more than five machines if they "continue or preserve in or with; to carry on." Black's Law Dictionary 953 (6th ed. 1990); see also Merriam-Webster OnLine Dictionary, 1999 ("maintain" means "to continue or persevere in: carry on, keep up" or "to support or provide for.").(7)



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



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



b. Lack of Knowledge



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





E. Amount of Fine Based on Number of Violations



1. Positions of Parties



DOR asserts that a separate fine of $5,000 can be imposed for each game room in operation at the North Myrtle Beach location that does not meet the regulatory definition of "single place or premises." Thus, given the six game rooms involved in this case, DOR seeks a fine of $30,000 from Gamexpress, the holder of the machine licenses, and $30,000 from Jungle Golf, the location owner. Both Gamexpress and Jungle Golf argue the penalty cannot be imposed for each game room. Rather the penalty is imposed only for the "person" committing the violation and here only one violation occurred. Thus, they argue only a maximum fine of $5,000 per person is authorized and further that the maximum fine of $5,000 is not warranted here.



2. Findings of Fact



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



Gamexpress places the machines with Jungle Golf and each share in the profits of the machines. Under this arrangement, management of the rooms in which the Class III machines are located is in Jungle Golf. However, actual maintenance and control of the Class III machines is in Gamexpress. In summary, as to the operation of the machines, Jungle Golf uses the game rooms for its retail business and Gamexpress uses the game rooms for its maintenance of machines for profit. Thus, both derive benefits from the licenses on the machines.



Further, as to the operation of the game rooms, Jungle Golf professes to have a policy requiring that an employee must be assigned to a single game room and upon leaving must close the game room with a chain across the entrance to the room. However, that purported policy was blatantly ignored by the employees on duty at the time of the inspection on September 17, 1998. Indeed, not only were employees not in open rooms, but after 12:00 midnight, rooms that had been closed were opened despite the fact that no employee entered those rooms.



3. Conclusions of Law



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



Here, the most general statement of the issue is what is the amount of the fine to be imposed on Gamexpress and Jungle Golf. Clearly, a violation of section 12-21-2804(A) results in the imposition of some fine and the maximum amount of that fine is $5,000. See S.C. Code Ann. § 12-21-2804(F) (Supp. 1998). Thus, to hold Gamexpress and Jungle Golf to a $30,000 fine each, DOR must establish that six violations occurred, i.e., maximum of $5,000 for each of the six violations. Accordingly, the more precise issue becomes deciding how many violations were committed by Gamexpress and Jungle Golf and deciding what is the proper amount of the fine for each violation. Under the facts of this case, I find Gamexpress committed one violation and Jungle Golf committed one violation. Further, I find that Gamexpress is liable for a fine of $2,500 and Jungle Golf is liable for a fine of $5,000.



In determining how many violations were committed by Gamexpress and Jungle Golf, it is necessary to determine how the statute characterizes the violation. When asked to interpret the meaning of a statute, the task is solely that of seeking to effectuate the legislature's intent. Laird v. Nationwide Ins. Co., 243 S.C. 388, 134 S.E.2d 206 (1964). In deciding legislative intent, the first and most basic inquiry is whether the language of the statute is plain and unambiguous and whether the statute conveys a clear and definite meaning. If the answer is yes, no occasion exists for employing rules of statutory interpretation, and the court has no right to look for or impose another meaning. Paschal v. State Election Comm'n, 317 S.C. 434, 454 S.E.2d 890 (1995). A court may not add words to a statute but can only apply the statutory language given by the General Assembly and must apply the terms of a clear and unambiguous statute according to their literal and ordinary meaning. Banks v. Columbia Ry., Gas & Electric Co., 113 S.C. 99, 101 S.E. 285 (1919); Glover v. Suitt Const. Co., 318 S.C. 465, 458 S.E.2d 535 (1995).



It is true that the courts will reject the ordinary meaning of the words used in a statute when to accept it would lead to a result so plainly absurd that it could not possibly have been intended by the Legislature or would defeat the plain legislative intention. Ray Bell Construction Company, Inc. v. School District of Greenville County, 331 S.C. 19, 501 S.E.2d 725 (1998). However, care must be taken not to rush to label a result "plainly absurd" when the application of the ordinary meaning of statutory language yields a result that is merely undesirable. A court should not rewrite statutes to provide a "better" result since such matters rest solely within the wisdom of the General Assembly. Creech v. South Carolina Pub. Serv. Auth., 200 S.C. 127, 20 S.E.2d 645 (1942).



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 statutes themselves. 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, 337, 312 S.E.2d 716, 720 (S.C. App. 1984).



a. Background Nature of the Violation



A violation occurs when a person "maintain[s] any licenses or permits for more than five [Class III] machines . . . at a single place or premises." To determine if a person has more than the authorized five machines, Regulation 117-190 explains what constitutes the requisite space identified as a single place or premises. In general, a single place or premises can be achieved in two configurations.



First, (omitting some requirements not pertinent to the issue at hand) a single place or premise is achieved by "a structure surrounded by exterior walls or firewalls consistent with the requirements of the applicable building code." Regs. 117-190. Such a structure is the common stand-alone building providing an entrance from the outside and providing an exit from the building to the outside. Such a structure may lawfully house five machines. The more difficult determination is the second permissible structure.



The second permissible structure that may be used to establish a single place or premises is that of "a structure surrounded by exterior walls [which] has two or more areas where video game machines are located." The "areas where video game machines are located" are interior configurations and those interior configurations are eligible for consideration as a "single place or premises" under two determinations. First, when considering the interior configuration, "each [must be] surrounded by exterior walls or firewalls." Second, before each interior configuration can become a single place or premises, DOR "must review all the facts and circumstances to determine if each area in reality constitutes a single place or premise for video game machines." That review may include many factors but must include at least the four factors of having a separate electric utility meter, having at least one separate employee on the premises during business hours, having a separate local business license where required, and having a separate state sales tax license.



b. Number of Violations



In the instant case, none of Jungle Golf's six interior game rooms, i.e., the "areas where video game machines are located," are separate places or premises since none of the six had an employee on the premises. However, the exterior walls of Jungle Golf's location provide a separate place or premises since it is "a structure surrounded by exterior walls or firewalls consistent with the requirements of the applicable building code." Thus, Jungle Golf has one and only one separate place or premises.



Having identified the space that constitutes a separate place or premises, the statute demands an inventory of the Class III machines occupying that space. Here, the inventory presents thirty machines. Under the statute, a violation occurs when the number of machines on the space exceeds five. S.C. Code Ann. § 12-21-2804(A) (Supp. 1998). Since obviously thirty exceeds five, a violation has been proven in the instant case. Moreover, and more to the point of this case, the excess over the limit of five produces only one violation whether the limit is exceeded by one or ten or twenty-five or any other number.



The imposition of a single fine is consistent with the clear language of the statute and imposing a single fine does not produce an absurd result so as to warrant disregarding that plain language. Had the General Assembly wanted multiple violations for each set of five excess machines, it could have easily created such a penalty. Rather, instead of multiple violations based on sets of five, the statute declares a single limit of five machines and explains that a penalty is imposed on the person that violates the five machine limit. Indeed, the General Assembly was aware that some violations would present facts requiring a greater penalty than other violations since § 12-21-2804(F) allows the imposition of a "fine of up to five thousand dollars" to account for violations deemed more significant than others.



In conclusion, in determining how many violations to cite under § 12-21-2804(A), an important distinction exists between a failure to create separate places or premises and a failure to limit the number of machines at a proper place or premises to five. The former, in and of itself, establishes no violation of § 12-21-2804. The latter, however, violates § 12-21-2804 and gives rise to a penalty of up to $5,000. In other words, no penalty arises under § 12-21-2804(A) for attempting but failing to create a separate place or premises. Rather, § 12-21-2804(A) imposes a penalty only when the number of Class III machines on a properly constituted place or premises exceeds five. For example, an operator could place one Class III machine in each of five "interior" structures, fail to have an employee in any of the interior structures (thus, fail the separate place or premises requirement of 117-190), and not violate § 12-21-2804(A), since the proper place or premises (the exterior walls comprising the structure that surrounds the interior configurations) is a valid single place or premises that does not exceed the five machines limit.



Based on the foregoing, Gamexpress and Jungle Golf committed a single violation of having more than five machines in a single place or premises. (8) Accordingly, the remaining issue is determining the amount of the fine to be imposed.



c. Amount of Fine



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



Here, the evidence establishes that Jungle Golf and Gamexpress have violated section 12-21-2804(A). While Jungle Golf may have had a policy of closing rooms when no employee was present in that room, such a purported policy was flagrantly violated during the SLED Agents' inspection. In fact, not only were employees not physically inside any of the open rooms, but after 12:00 midnight, rooms that had been closed were opened with no attempt or pretense of having an employee enter those rooms. Under such circumstances, the imposition of a $5,000 fine on Jungle Golf is proper.



Gamexpress on the other hand has no management control at the location. While a party who derives income from the machines should not be dismissed from liability for violations on the very premises that produce the income, the lack of control over the factor that caused the violation is a mitigating factor. Given Gamexpress's lesser control, Gamexpress is liable for a penalty of $2,500.



IV. Order



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



A fine of $2,500 is imposed upon Gamexpress and a fine of $5,000 is imposed upon Jungle Golf. The thirty Class III machine licenses held by Gamexpress are revoked effective as of the date of this order. The thirty Class III machines involved in this matter shall not be licensed for a period of six months from the date of this order. Finally, Gamexpress shall provide DOR with the serial numbers of the thirty machines involved in this matter so that DOR may adequately enforce the six month non-licensure period.



AND IT IS SO ORDERED.





____________________________

RAY N. STEVENS

Administrative Law Judge



Dated: August 3, 1999

Columbia, South Carolina

1. Normally, the first issue examined in a case involving an alleged violation of the five machine limit of S.C. Code Ann. § 12-21-2804(A) (Supp. 1998) is whether each game room qualifies as a "single place or premises" as defined in 27 S.C. Code Ann. Regs. 117-190 (Supp. 1998). However, here Gamexpress and Jungle Golf have admitted that a violation of § 12-21-2804(A) occurred. Thus, no need exists for findings of fact or conclusions of law on that issue and none are presented here.

2. Regulation 117-190 requires, among other things, each game room to have a separate employee to qualify as a "single place or premises" under § 12-21-2804(A).

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

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

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

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

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

8. In a few ALJD decisions, multiple fines have been imposed on a single person for each game room that failed to satisfy the regulatory definition of "single place or premises." See South Carolina Department of Revenue v. Mid-South, Inc., 97-ALJ-17-0732-CC (September 4, 1998); South Carolina Department of Revenue v. Great Games, Inc. and Nasib, Inc., 97-ALJ-17-0655-CC (February 19, 1998); South Carolina Department of Revenue v. Collins Entertainment Corporation, 97-ALJ-17-0079-CC (August 14, 1997); South Carolina Department of Revenue v. Great Games, Inc. and Dinish Bavishi, 97-ALJ-17-0001-CC (August 13, 1997). However, the instant case appears to be the first matter in which full argument of the issue has been presented by all parties to the controversy.


Brown Bldg.

 

 

 

 

 

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