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South Carolina Department of Revenue v. Meenaxi, Inc.

Court of Appeals of South Carolina

September 7, 2016

South Carolina Department of Revenue, Respondent,
Meenaxi, Inc., d/b/a Corner Mart, Appellant. Appellate Case No. 2015-000292

          Heard April 19, 2016

         Appeal From The Administrative Law Court Deborah Brooks Durden, Administrative Law Judge

          S. Jahue Moore and John Calvin Bradley, Jr., both of Moore Taylor Law Firm, P.A., of West Columbia, for Appellant.

          Milton Gary Kimpson, Lauren Acquaviva, and Sean Gordon Ryan, all of Columbia, for Respondent.

          LOCKEMY, C.J.:

         Meenaxi, Inc. d/b/a Corner Mart (Appellant) appeals the administrative law court's (ALC's) order affirming the South Carolina Department of Revenue's (the Department) revocation of an off premises beer and wine permit that allowed alcohol to be sold at the Corner Mart. On appeal, Appellant argues (1) the ALC erred in determining the Department brought and pursued this action against the proper parties; (2) the Department's failure to bring and pursue this case against the proper parties violated the due process rights of Malkesh Patel-the owner of Meenaxi, Inc. and the Corner Mart; (3) the ALC erred in revoking Appellant's permit pursuant to subsection 61-4-580(5) of the South Carolina Code (2009); (4) the ALC's factual findings and legal conclusions were based upon erroneously admitted testimony and evidence; and (5) the ALC abused its discretion and committed an error of law by determining that revocation of the permit was the appropriate penalty. We affirm.


         Meenaxi, Inc. owns the Corner Mart, a convenience store located in Anderson that sold beer and wine pursuant to an off premises beer and wine permit issued by the Department on January 19, 2012. On February 26, 2013, Agent Thomas Bielawski-a special agent in the South Carolina Law Enforcement Division's (SLED's) Video Gambling Unit-conducted a regulatory inspection of the Corner Mart pursuant to section 61-4-230 of the South Carolina Code (2009) and discovered two video gaming machines-a Products Direct machine and a Gift Surplus machine-in the store. Agent Bielawksi examined the machines and determined they were illegal video gaming machines, as defined by section 12-21-2710 of the South Carolina Code (2014). Accordingly, he seized the machines pursuant to his authority under section 12-21-2712 of the South Carolina Code (2014).[1] In addition, he issued a citation to "Malkesh Patel Meenaxi, Inc." for violating section 12-21-2710 and subsection 61-4-580(5)[2] because he determined Appellant had knowingly kept illegal video gaming machines inside the Corner Mart. Agent Bielawski then brought the machines before an Anderson County magistrate. The magistrate examined the machines, determined they were illegal video gaming machines, and issued an Order of Destruction on March 1, 2013.[3]The Order of Destruction stated, "The Defendant has 15 days from the receipt of this Order to request a Post Seizure Hearing to contest the illegality of the machine(s). Otherwise, the machine(s) will be destroyed." The owner of the machines, Encore Entertainment, requested a post-seizure hearing, which was scheduled for December 17, 2013. Encore Entertainment subsequently withdrew its request for a post-seizure hearing, and the magistrate issued a Final Order on December 18, 2013, finding the machines illegal and ordering their destruction.[4]

         On March 28, 2013, the Department gave Appellant written notice of its intent to revoke the off premises beer and wine permit. On April 3, 2013, Appellant protested the revocation of the permit. On May 8, 2013, the Department issued a written determination that Appellant violated subsection 61-4-580(5) by knowingly permitting illegal gaming machines to be kept on its premises. The Department determined revocation of the off premises beer and wine permit was the appropriate penalty for violating subsection 61-4-580(5). Appellant appealed the Department's determination to the ALC.

         On December 4, 2014, the ALC held a contested case hearing on this matter. In an order issued on January 8, 2015, the ALC affirmed the Department's revocation of the permit. The ALC found the record contained sufficient evidence that the Department met its burden of showing the two machines contained games of chance in violation of section 12-21-2710, the machines were located on Appellant's premises, and Appellant knowingly permitted the machines to be placed on its premises in violation of subsection 61-4-580(5). Appellant filed a motion for reconsideration, which the ALC denied. This appeal followed.


         "In an appeal from the decision of an administrative agency, the Administrative Procedures Act [(the APA)] provides the appropriate standard of review." Original Blue Ribbon Taxi Corp. v. S.C. Dep't of Motor Vehicles, 380 S.C. 600, 604, 670 S.E.2d 674, 676 (Ct. App. 2008). "Pursuant to the APA, this court may reverse or modify the ALC if the appellant's substantial rights have been prejudiced because the administrative decisions are: (a) in violation of constitutional or statutory provisions; (b) in excess of the statutory authority of the agency; (c) made upon unlawful procedure; (d) affected by an error of law; (e) clearly erroneous in view of the reliable, probative, and substantial evidence on the whole record; or (f) arbitrary or capricious or characterized by abuse of discretion or clearly unwarranted exercise of discretion." MRI at Belfair, LLC v. S.C. Dep't of Health & Envtl. Control, 394 S.C. 567, 572, 716 S.E.2d 111, 113 (Ct. App. 2011).


         A. Proper Parties

         1. Civil Forfeiture Action in the Magistrate Court

         Appellant argues because neither Patel nor Meenaxi, Inc. was a party to the civil forfeiture action in the magistrate court, the magistrate's orders may not be used against Patel or Meenaxi, Inc. in any way. Thus, Appellant asserts the ALC erred in admitting the magistrate's Order of Destruction and Final Order into evidence. We disagree.

         "The government's seizure of alleged contraband may arise in the context of a civil or criminal forfeiture proceeding." Mims Amusement Co. v. S.C. Law Enf't Div., 366 S.C. 141, 150 n.4, 621 S.E.2d 344, 348 n.4 (2005). "The critical difference between civil forfeiture and criminal forfeiture is the identity of the defendant. In civil forfeiture, the Government proceeds against a thing (rem). In criminal forfeiture, it proceeds against a human being (personam)." Id. (quoting U.S. v. Croce, 345 F.Supp.2d 492, 494 (E.D. Pa. 2004)). We find the seized Products Direct and Gift Surplus machines were the only proper defendants in the civil forfeiture action before the magistrate. See Union Cty. Sheriff's Office v. Henderson, 395 S.C. 516, 518 n.1, 719 S.E.2d 665, 666 n.1 (2011) (stating because a civil forfeiture action to determine whether machines are illegal gambling machines subject to destruction is an action in rem, "the proper defendants are only the . . . seized machines which are the subject of the Order of Destruction").

         In addition, we find the magistrate's orders were admissible evidence in this case because they were in rem determinations about the illegal character of the video gaming machines seized from the Corner Mart. See Ex parte Kenmore Shoe Co., 50 S.C. 140, 146, 27 S.E. 682, 684 (1897) ("Where the court has jurisdiction of the res, its decree in rem upon the character or status of the subject-matter is binding, not only on the parties and their privies, but also upon all persons who might have asserted an interest therein."); id. at 147, 27 S.E. at 684 (stating in rem judgments bind third persons and are "conclusive evidence against all the world"); Fitchette v. Sumter Hardwood Co., 145 S.C. 53, 67-68, 142 S.E. 828, 833 (1928) ("A judicial record is always admissible to prove the fact that a judgment has been rendered, the time of its rendition, and the terms and effect of the judgment, for the mere fact that a judgment was given, this being a thing done by public authority, can never be considered as res inter alios acta, nor can the legal consequences of the rendition of such judgment be so considered.").

         2. Permit Revocation Action

         Appellant argues the ALC erred in refusing to dismiss this case on the ground that the Department failed to sue the correct parties. Specifically, Appellant argues the permit was issued to Patel and Meenaxi, Inc. but neither was made a party to this action. In addition, Appellant asserts there was no evidence at trial that "Meenaxi, Inc. d/b/a Corner Mart"-the corporate entity designated as the defendant in this action-exists. We disagree.

         Patel testified his corporation, Meenaxi, Inc., owned and operated the Corner Mart. Appellant's beer and wine permit listed the following information:

Malkesh Patel Meenaxi Inc. 713 Britton St Anderson[, ] S.C. 29621-2614
Corner Mart 1010 E Shockley Ferry Road Anderson, SC 29624

         Title 61 of the South Carolina Code governs "Alcohol and Alcoholic Beverages, " and section 61-2-100 of the South Carolina Code (2009) describes the "[p]ersons entitled to be licensees or permittees." As used in Title 61 "and unless otherwise required by the context, " the term "'[p]erson' includes an individual, a trust, estate, partnership, limited liability company, receiver, association, company, corporation, or any other group." S.C. Code Ann. § 61-2-100(H)(1) (2009). "Licenses and permits may be issued only to the person who is the owner of the business seeking the permit or license." S.C. Code Ann. § 61-2-100(A) (2009).

         Based on Patel's testimony and the information listed on the permit, we find it was reasonable for the ALC to conclude that Meenaxi, Inc. owned and operated the Corner Mart-and in effect was doing business as the Corner Mart-even though the permit did not include the words "doing business as" or "d/b/a."

         We further find that Appellant was the sole permit holder and Patel-the owner of Appellant-was simply Appellant's principal and designated agent. See S.C. Code Ann. § 61-2-100(H)(2)(a), (g) (2009) (stating under Title 61, "a person who owns twenty-five percent or more of the value of the business entity" and "an officer of the business or entity which owns the business" are considered "principals" of the business or entity); S.C. Code Ann. § 61-2-100(F) (2009) ("Businesses licensed or permitted by the department under this title must designate with the department an agent and mailing address for service of notices."). Because the permit at issue here was held by a business rather than an individual, section 61-2-100(F) mandated that Appellant designate an agent to receive service of notices. As the Department explained at oral argument, Patel was not the permit holder-he was simply Appellant's contact person. Because Patel was not the permit holder, the Department was not required to add him as a party to this permit revocation action.

         B. Due Process

         Appellant argues the ALC erred in finding the Department did not violate Patel's due process rights by failing to add him as a party to this action. Appellant also argues the Department's failure to name Patel as a party prejudiced Patel because he had no opportunity to inspect the machines destroyed upon the magistrate's order. We disagree.

         "No person shall be finally bound by a judicial or quasi judicial decision of an administrative agency affecting private rights except on due notice and an opportunity [to] be heard . . . and he shall have in all such instances the right to judicial review." Stono River Envtl. Prot. Ass'n v. S.C. Dep't of Health & Envtl. Control, 305 S.C. 90, 94, 406 S.E.2d 340, 342 (1991) (quoting S.C. Const. art. I, § 22). "[P]roof of a denial of due process in an administrative proceeding requires a showing of substantial prejudice." Palmetto All., Inc. v. S.C. Pub. Serv. Comm'n, 282 S.C. 430, 435, 319 S.E.2d 695, 698 (1984).

         As stated previously, Patel was not a proper party to the magistrate court action, and the Department was not required to add him as a party to this permit revocation action because he was not the permit holder. Therefore, Patel cannot ...

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