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. Odyssey Amusements, Inc.

AGENCY:
South Carolina Department of Revenue

PARTIES:
Petitioners:
South Carolina Department of Revenue

Respondents:
Odyssey Amusements, Inc., at 3128 Hwy 301 North, Hamer, South Carolina
 
DOCKET NUMBER:
99-ALJ-17-0379-CC

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

For the Respondent: John E. Cheatham, Esquire
 

ORDERS:

FINAL ORDER AND DECISION

Opinion: Final Order and Decision (Contested Case pursuant to S. C. Code Ann. § 1-23-350) requiring the Respondent to pay a $15,000.00 fine.



STATEMENT OF THE CASE

This matter is before me pursuant to S.C. Code Ann. § 12-4-30 (Supp. 1998) and S.C. Code Ann. § 1-23-600 (Supp. 1998) upon the request by Odyssey Amusements, Inc., at 3128 Hwy 301 North, Hamer, South Carolina ("Respondent) for a hearing. The South Carolina Department of Revenue ("Department") seeks a $30,000 penalty against Respondent for operating machines at a casino and for continuing to operate machines at a casino after notice was given. The Department also seeks to revoke Respondent's establishment licenses and retail sales tax licenses in use on the dates of the alleged violations.

After notice to all parties, a hearing was conducted on August 23, 1999, at the offices of the Administrative Law Judge Division in Columbia, South Carolina.



FINDINGS OF FACT

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



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

2. On July 3, 1999, at 11:30 p.m., the South Carolina State Law Enforcement Division ("SLED") issued Odyssey Amusements, Inc. ("Respondent") a preliminary findings report for operating 30 machines at a casino as prohibited by Act 125, 1999 S.C. Acts, (to be codified at S.C. Code Ann., Section 12-22-740(A)).

  • 3. On July 5, 1999, at 5:00 p.m., SLED issued Respondent a preliminary findings report for continuing to operate 30 machines at a casino as prohibited by Act 125, 1999 S.C. Acts, (to be codified at S.C. Code Ann., Section 12-22-740(A)).
  • 4. On July 8, 1999, the Department issued violations to Respondent for the offenses listed in Findings of Fact two and three. The Department informed the Respondent that it intended to revoke Respondent's retail sales and establishment licenses, and that it intended to assess penalties totaling $30,000.

    • 5. At 10:00 a.m. on July 8, 1999, the owner of the machines removed them from the premises at 3128 Highway 301 North, Hamer, S.C. No machines have been on the premises since that date.
    • 6. On July 29, 1999, the Department issued its final determination holding that Respondent violated Act 125, 1999 S.C. Acts, (to be codified at S.C. Code Ann., Section 12-22-740(A)), on July 3, 1999, and July 5, 1999, assessed $30,000 in penalties against Respondent, and informed Respondent that it intended to revoke its retail sales tax licenses and establishment licenses that were in use at 3128 Highway 301 North, Hamer, S. C. on July 3, 1999, and July 5, 1999. Those licenses numbers are as follows: Retail sales tax license numbers 017073088, 0170073097, 017073104, 0170073122, 0170073131, and 017073140; and establishment license numbers 855065376, 855065385, 855065394, 855065410, 855065429, and 855065438.
    • 7. Act 125, 1999 S.C. Acts, (to be codified at S.C. Code Ann., Section 12-22-740(A)) was signed by the Governor of the State of South Carolina on July 2, 1999.
    • 8. The contract for construction of the structure at 3128 Highway 301 North, Hamer, S.C., was signed on or about May 1, 1999. Grading for the building at the location began on May 10, 1999.
    • 9. The building located at 3128 Highway 301 North, Hamer, South Carolina, is owned by Rosewood Developers, and is leased to Respondent.
    • 10. The building contains fourteen rooms, each of which is intended for usage as a video poker room. It was the intent of Respondent that there would be placed in each of the fourteen rooms five video game machines licensed under the provisions of S.C. Code Ann. § 12-21-2120(A)(3) (Supp. 1998) ("machines").
    • 11. On July 3, 1999 and on July 5, 1999 each of the six rooms in the building contained five machines. When SLED inspected each room on these dates, all the machines were in operation, and were accessible for play to the public.
    • 12. On July 3, 1999 and on July 5, 1999 each of the six rooms within the building were 'single places or premises,' as that term was defined, applied, and interpreted pursuant to in S. C. Code Regs. 117-190 on or before May 31, 1999. All six rooms were located within a single structure.
    • 13. The owner of all the video game machines delivered them to the six 'single place or premises' at 3128 Highway 301 North, Hamer, South Carolina on July 2, 1999. Prior to that date, there were no machines licensed or in operation within the structure.
    • 14. Since the construction of the structure was not complete on May 31, 1999, none of the 'single places or premises' inside the structure located at 3128 Highway 301 North, Hamer, South Carolina met the qualifications of S. C. Code Regs. 117-190. The structure was basically complete on June 23, 1999.
    • 15. Odyssey Amusements, Inc., applied for the sales tax licenses and establishment licenses in use at 3128 Highway 301 North, Hamer, South Carolina on December 15, 1998. On the applications for these licenses Odyssey Amusements, Inc., listed the business address as 3137 Hwy 301 North, Hamer, South Carolina. This was the address for the business known as Odyssey. Odyssey ceased doing business at 3137 Highway 301 North on March 27, 1999, and moved the licenses across the highway to 3128 Highway 301 North, Hamer, South Carolina.

    DISCUSSION

    Act 125, 1999 S.C. Acts, (to be codified at S.C. Code Ann., Section 12-22-740), provides as follows:

    (A)(1)Except as provided in subsection (B), machines shall not be operated or continue to operate at any casino. For purposes of this chapter, the term 'casino' shall mean both of the following:

    (a) any two or more 'single places or premises', as that term was defined, applied, and interpreted in Regulation 117-190 on or before May 31, 1999, that are located within a single structure, and ....

    (B)(1) A casino shall not operate or continue to operate except as provided in this subsection. No casino shall continue to operate as a casino unless on May 31, 1999:

    (a) machines were both licensed and in operation within each 'single place or premises' as that term was defined, applied, and interpreted in Regulation 117-190 on or before May 31, 1999; and

    (b) each single place or premises within the casino met the qualifications of Regulation 117-190 and a certificate of occupancy, if otherwise required by law, has been issued for the structure within which two or more single places or premises are located.



    Respondent admits that on May 31, 1999, it did not have any machines licensed or in operation within each 'single place or premises' as that term was defined, applied, and interpreted in S.C. Code Regs. 117-190; further, it admits that on May 31, 1999 each 'single place or premises' within the casino failed to meet the qualifications of S.C. Code Regs. 117-190.

    Respondent contends that for a variety of reasons, Act 125, 1999 S.C. Acts, (to be codified at S.C. Code Ann., Section 12-22-740(A)), is unconstitutional. A threshold question in every case is whether the court has subject matter jurisdiction over the controversy before it. Issues relating to subject matter jurisdiction may be raised at any time, cannot be waived by the parties, and may be considered by the court on its own motion. See Johnson v. State, 319 S.C. 62, 459 S.E.2d 840 (1995). The question for consideration here is whether the Administrative Law Judge Division has the authority to rule on the constitutionality of a statue, and whether it has the authority to interpret statutes.

    The Administrative Law Judge Division was created by the legislature as an agency of the Executive Branch of the government of this state. S.C. Code Ann. § 1-23-500 (Supp. 1998). The Division is authorized within the Administrative Procedures Act, S.C. Code Ann. § 1-23-310, et seq. and pursuant to S.C. Code Ann. § 48-39-150 (D) (1997), to hear contested cases arising under Chapter 39 of Title 48 of the 1976 Code.

    In doing so, the Administrative Law Judge has the same power and authority as do Circuit Court Judges in chambers or in hearing and to issue such writs as necessary to give effect to the jurisdiction of the Administrative Law Judge Division. S.C. Code Ann. § 1-23-630 (Supp.1998). The Administrative Law Judges share the authoritative powers of their Circuit Court judge counterparts; however, these do not extend beyond their jurisdictional authority under the statute. As an administrative agency, the Division has only such powers as have been conferred upon it by law, and must act within the authority created for that purpose. Bazzle v. Huff, 319 S.C. 443, 462 S.E.2d 273 (1995); Windell K. Drury, et al v. S. C. DHEC, OCRM, and John Perkins, and Fripp Island Property Owners' Ass'n and Fripp Island Public Service District, 99-ALJ-07-0135-CC, decided August 6, 1999.

    The South Carolina Supreme Court has recently stated that " [a]n administrative agency must follow the law as written until its constitutionality is judicially determined; an agency has no authority to pass on the constitutionality of a statute." Beaufort County Bd. of Education v. Lighthouse Charter School Committee, 1999 WL 350584 (S.C. June 1, 1999). See also South Carolina Tax Comm'n v. South Carolina Tax Bd. of Review, 278 S.C. 556, 299 S.E.2d 489 (1983). Therefore, administrative proceedings are not the procedural platform for determining issues of statutory constitutionality. However, although administrative agencies are not authorized to declare statutes unconstitutional, they may, in appropriate cases, resolve constitutional issues, such as questions of the unconstitutional application of a statute to the specific circumstances of a case; the constitutionality of a regulation adopted by an agency; or questions of whether an agency's procedure is constitutionally deficient. See Richardson v. Tennessee Bd. of Dentistry, 913 S.W.2d 446 (Tenn. 1995). In this case, the Petitioner seeks a declaration that Act 125, 1999 S. C. Acts, (to be codified at S. C. Code Ann.. § 12-22-740 (A) is unconstitutional. The Administrative Law Judge Division is an agency of the executive branch of government. S.C. Code Ann. § 1-23-500 (Supp. 1998). Accordingly, I must follow the law as written, and cannot rule on the constitutionality of Act 125, 1999 S.C. Acts. I find that the Division lacks subject matter jurisdiction to rule on this issue. Therefore, no evidence with regard to this issue will be considered in rendering a final decision in this case.

    Based on the stipulated facts, and the admissions of Respondent, it is clear that Respondent violated the provisions of Act 125, 1999 S.C. Acts, (to be codified at S.C. Code Ann., Section 12-22-740).

    S.C. Code Ann. § 12-54-40(H) (Supp. 1998) provides, in part, as follows: "A person who must obtain a license . . . who fails . . . to comply with statutory provisions, is subject to a penalty of not less than fifty dollars nor more than five hundred dollars for each failure."

    S.C. Code Ann. § 12-54-90(A) (Supp. 1998) provides, in part, as follows: "When a person fails, neglects, violates, or refuses to comply with a provision of law or regulation administered by the department, the department, in its discretion, may revoke one or more licenses held by the taxpayer within ten days of notification in writing of the taxpayer's failure to comply."



    CONCLUSIONS OF LAWBased on the Findings of Fact and Discussion, I conclude, as a matter of law, the following:



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

    2. Respondent violated the provisions of Act 125, 1999 S.C. Acts, (to be codified at S.C. Code Ann. Section 12-22-740), by operating machines at a casino on July 3, 1999, (30 counts), and by continuing to operate machines at a casino on July 5, 1999, (30 counts).

    3. The Respondent is a person required to obtain a license, and failed to comply with statutory provisions.

    4. Act 125, 1999 S.C. Acts, (to be codified at S.C. Code Ann., Section 12-22-740) is a provision of law administered by the department.

    5. It is a generally recognized principle of administrative law that the fact-finder has the authority to impose an administrative penalty, as established by the legislature, after the parties have had an opportunity to have a hearing and be heard on the issues. Walker v. S.C. ABC Common, 305 S.C. 209, 407 S.E.2d 633 (1991). See also City of Louisville v. Milligan, 798 S.W.2d 454 (Ky. 1990); Matter of Henry Youth Hockey Ass'n, 511 N.W.2d 452 (Minn. Ct. App. 1994); Shadow Lake of Noel, Inc. v. Supervisor of Liquor Control, 893 S.W.2d 835 (Mo. Ct. App. 1995); Ohio Real Estate Common v. Aqua Sun Inv., 655 N.E.2d 266 (Ohio 1995); State Police v. Cantina Gloria's, 639 A.2d 14 (Pa. 1994); Vermont Agency of Natural Resources v. Duranleau, 617 A.2d 143 (Vt. 1992).

    6. I find that the appropriate penalty under the facts and circumstances of this case is the revocation of the retail sales tax and establishment licenses listed in Findings of Fact number six, and a monetary penalty to be paid by the Respondent in the amount of $15,000, in light of the fact that the Respondent disconnected the machines and closed down its operation immediately following the second visit to the establishment by SLED.



    ORDER

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

    ORDERED, that the Respondent pay a $15,000 penalty to the South Carolina Department of Revenue for violating the provisions of Act 125, 1999 S.C. Acts, (to be codified at S.C. Code Ann., Section 12-22-740), and that the licenses listed in Findings of Fact number six are hereby revoked.

    AND IT IS SO ORDERED.







    ___________________________

    Marvin F. Kittrell

    Chief Judge



    September 9, 1999

    Columbia, South Carolina


Brown Bldg.

 

 

 

 

 

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