ORDERS:
ORDER OF REMAND
STATEMENT
OF THE CASE
This matter comes before me pursuant to LRW, LLC, d/b/a Greg’s Cabana Bar
& Grill’s Motion for Removal of Assessment and Remand to the Department of
Revenue. The Department proposed an assessment of a five hundred dollar fine ($500.00)
on December 6, 2005 following the seizure of a Megatouch Force 2005 game from
the Petitioner’s business by the State Law Enforcement Division on October 3,
2005. Although the Petitioner filed an action in magistrate’s court to protest
the seizure of the machine, it did not protest the assessment. Since LRW was
in default, the Department issued the assessment on March 23, 2006. This
action followed.
DISCUSSION
According to the Revenue Procedures Act, a proposed assessment may be
removed and remanded to the Department for consideration on the merits “for
good cause shown.” S.C. Code Ann. § 12-60-510 (A)(2) states:
If a taxpayer
fails to file a protest with the department within ninety days of the date of
the proposed assessment, the taxpayer is in default, and the department must
issue an assessment for the taxes. The assessment may be removed by the
Administrative Law Court for good cause shown, and the matter may be remanded
to the department.
The phrase “for
good cause shown” is not defined in the Revenue Procedures Act. It is,
therefore, necessary to turn to other sources for guidance on this issue.
South
Carolina Rules of Civil Procedure, Rule 55 (c) also includes the phrase “for
good cause shown” in setting aside an entry of default. In that context, the
SC Court of Appeals has stated that the following factors be considered to
determine whether “good cause” is shown: “1. the timing of the defendant’s
motion for relief; 2. whether the defendant has a meritorious defense; and 3.
the degree of prejudice to the plaintiff if relief is granted.” Stark Truss
Co., Inc., v. Superior Construction Company, 360 S.C. 503, 602 S.E. 2d 99
(Ct. App. 2004). Here, LRW has shown that these factors are present.
Although the Petitioner’s argument is weakest on the first factor, the
timing issue, I find that the Petitioner has met its burden on this matter.
The statutes that deal with this situation are not entirely clear as to whether
an action must be filed with the ALC in addition to the action to determine
the legality of the machine which is filed in magistrate’s court. The machines
were seized on October 3, 2005 and the magistrate found them to be illegal. The
Petitioner requested a magistrate’s court review on October 11, 2005, citing State
v. 192 Coin Operated Machines, 338 S.C. 176, 525 S.E..2d 872 (2000), where
the Supreme Court, in interpreting S.C. Code Ann. § 23-21-2712, ruled that the
magistrate shall determine the legality of the machine and must include an
opportunity for the owner of the machines to be heard concerning their
legality.
S.C. Code Ann. § 23-21-2712 states that “any machine. . . prohibited by
Section 12-21-2710 must be seized by any law enforcement officer and at once
taken before any magistrate of the county in which the machine . . . is seized
who shall immediately examine it, and if satisfied that it is in violation of
Section 12-21-2710 or any other law of this State, direct that it be
immediately destroyed.” The magistrate found that the machine was a game of
chance as prohibited. Petitioner’s attorney requested a review of that
decision, citing State v. 192 Coin Operated Machines and the right to be
present to testify concerning the legality of the machines. As noted, the
Petitioner requested this review on October 11, 2005, just eight days after the
machine was seized. To date, this hearing as not been held.
Likewise, the notice of assessment dated December 6, 2005 referenced the
seizure of the machines in October and outlined the procedures for contesting
the assessment. To protest the assessment, the taxpayer had to notify the
Department in writing within ninety days from the date of the assessment and
reference specific points including reasons for the appeal. (Petitioner’s Exh.
2) The owner of Greg’s Cabana testified he thought that the hearing request
before the magistrate took care of all of the issues. It appears that there
was confusion on the part of the Petitioner as to the dual tracks of this type
of violation. He was not aware that the DOR assessment action was
separate from the SLED violation matter. Because he believed that the
letter requesting the magistrate’s review hearing dealt with both the violation
and the assessment, he did not timely protest the assessment. As soon as he
realized his error, he filed this motion with the ALC to contest the
assessment. This filing was timely.
Regarding the issue of a meritorious defense, state law requires that
each machine be examined individually, S.C. Code Ann. § 23-21-2712. The Petitioner,
however, also submits an order dated April 10, 2006 from a different magistrate
on a different machine, also a Megatouch machine, which found that the machines
were not games of chance. This order allowed the Petitioner to believe that
his games were not games of chance and that he had a meritorious defense to the
charge. “A meritorious defense . . . need be only one . . . worthy of a
hearing or judicial inquiry because it raises a question of law deserving of
some investigation and discussion.” Graham v. Town of Loris, 272 S.C.
442, 248 S.E. 2d 594 (1978).
Finally, regarding the degree of prejudice to the plaintiff if relief is
granted, although DOR argued that it would be prejudiced because there is no
valid definition of “good cause” shown, I disagree. The law in this state
favors an opportunity for a disposition of the issues on the merits rather than
on technicalities. See, Mictronics, Inc. v. SC Dept. of Revenue,
345 SC 506, 548 S.E.2d 223 (Ct. App. 2001). The Petitioner should have a full opportunity
to be heard on the legality of this machine and the proposed assessment. As
provided in S.C. Code Ann. § 12-60-510 (B), “Upon remand, the department has
thirty days, or a longer period ordered by the administrative law judge, to
consider the new facts and issues and amend its department determination.”
I find and order that the Petitioner’s Motion for Removal of Assessment
and Remand to the Department of Revenue shall be granted. The Department shall
have forty five (45) days to issue its determination.
AND IT IS SO ORDERED.
_________________________________
Carolyn
C. Matthews,
Administrative
Law Judge
October 12, 2006
Columbia, SC |
