FRATERNAL ORDER v. Dept. of Revenue

• Decision Date: 09 December 2002
• Docket Number: No. 25566.,25566.
• Citation: 352 S.C. 420,574 S.E.2d 717
• Court: South Carolina Supreme Court
• Parties: FRATERNAL ORDER OF POLICE, Charleston Lodge # 3, Pet Helpers, Inc. d/b/a Shipwatch Bingo, Army Navy Union Garrison # 2020, Faith Temple Full Gospel Fellowship Church, A. Terre Des Hommes USA, Inc., Cherokee Suicide Intervention Center, Inc., Army Navy Garrison # 2165, Lexington Voiture 1211 La Societe Des 40 & 8 d/b/a Sunset Bingo, United Veteran Association, Inc., Roadrunners Softball Association, Inc., United Society of the Blind of Greenwood, The Good Samaritan Mission Center d/b/a Beacon Bingo, Fraternal Order of the Elks (BPOE), Greenville Lodge No. 858, Piedmont Historical Society d/b/a Great American Bingo, Pilgrim's Inn, Inc., West Main Community Club, Ms. Wheelchair South Carolina, Inc., Citizens for Advancement of the Physically Handicapped, Post 174 American Legion Ladies Auxiliary, HF Help Corporation, Army Navy Garrison # 2154, AMVETS Post 80, Army Navy Garrison # 1994, Army Navy Garrison # 2154, Cherokee Gaffney Sertoma Club 10752, South Carolina Dairy Goat Association, Grand Strand Optimist Club d/b/a Galaxy Bingo, Miss Dillon County Beauty Pageant, Inc., Church in the Lord Jesus Christ of the Apostolic Faith, Inc.-Lake City, Church in the Lord Jesus Christ of the Apostolic Faith, Inc.-Darlington, Church of the Lord Jesus Christ of the Apostolic Faith, Inc.-Lynchburg, Dovesville Rural Fire Department, Union Baptist Church, VFW # 3181, Appellants, v. SOUTH CAROLINA DEPARTMENT OF REVENUE, Respondent.

352 S.C. 420

574 S.E.2d 717

FRATERNAL ORDER OF POLICE, Charleston Lodge # 3, Pet Helpers, Inc. d/b/a Shipwatch Bingo, Army Navy Union Garrison # 2020, Faith Temple Full Gospel Fellowship Church, A. Terre Des Hommes USA, Inc., Cherokee Suicide Intervention Center, Inc., Army Navy Garrison # 2165, Lexington Voiture & 8 d/b/a Sunset Bingo, United Veteran Association, Inc., Roadrunners Softball Association, Inc., United Society of the Blind of Greenwood, The Good Samaritan Mission Center d/b/a Beacon Bingo, Fraternal Order of the Elks (BPOE), Greenville Lodge No. 858, Piedmont Historical Society d/b/a Great American Bingo, Pilgrim's Inn, Inc., West Main Community Club, Ms. Wheelchair South Carolina, Inc., Citizens for Advancement of the Physically Handicapped, Post 174 American Legion Ladies Auxiliary, HF Help Corporation, Army Navy Garrison # 2154, AMVETS Post 80, Army Navy Garrison # 1994, Army Navy Garrison # 2154, Cherokee Gaffney Sertoma Club 10752, South Carolina Dairy Goat Association, Grand Strand Optimist Club d/b/a Galaxy Bingo, Miss Dillon County Beauty Pageant, Inc., Church in the Lord Jesus Christ of the Apostolic Faith, Inc.-Lake City, Church in the Lord Jesus Christ of the Apostolic Faith, Inc.-Darlington, Church of the Lord Jesus Christ of the Apostolic Faith, Inc.-Lynchburg, Dovesville Rural Fire Department, Union Baptist Church, VFW # 3181, Appellants, v. SOUTH CAROLINA DEPARTMENT OF REVENUE, Respondent.

No. 25566.

Supreme Court of South Carolina.

Heard October 8, 2002.

Decided December 9, 2002.

Joseph Alton Bivens and Gerald M. Finkel, both of Finkel & Altman, L.L.C., of Columbia, for appellants.

Harry T. Cooper, Jr., Ronald W. Urban and Sarah G. Major, all of South Carolina Department of Revenue, of Columbia, for respondent. Chief Justice TOAL:

Fraternal Order of Police et. al. ("Taxpayers") challenge the constitutionality of the Bingo Act of 1989 ("1989 Act"),¹ and two additional bingo statutes enacted after the 1989 Act, S.C.Code Ann. §§ 12-21-3441 and 12-21-3610 (Supp.1995).² Taxpayers brought their challenge in an effort to recover taxes paid to the South Carolina Department of Revenue ("the Department") pursuant to these statutes between July 1, 1992, and October 1, 1997.

FACTUAL/PROCEDURAL BACKGROUND

The parties have stipulated to the relevant facts. The Taxpayers first filed an action in 1993 challenging the 1989 Act on both constitutional and non-constitutional grounds. The Taxpayers did not exhaust their administrative remedies by filing a claim for a refund for taxes paid, and the case was dismissed in 1994 with leave to restore. Taxpayers filed a refund claim in 1995, and raised all of the non-constitutional claims from the 1993 action. The Department denied the refund claim, and the Taxpayers appealed all the way to this Court. This Court affirmed on two of the three non-constitutional issues, and reversed on a third. Fraternal Order of Police v. South Carolina Dept. of Rev., 332 S.C. 496, 506 S.E.2d 495 (1998) ("FOP I").³ In 1997, the Taxpayers filed a motion to have their 1993 claim reinstated in order to move forward on the constitutional causes of action not addressed in FOP I. The motion was granted, and this Court denied the Department's appeal as interlocutory. The Taxpayers' original 1993 complaint was reinstated, but the parties stipulated that they were only raising the constitutional challenges to equal protection and due process within the original complaint.⁴

In addition to the 1989 Act, the Taxpayers are challenging the constitutionality of South Carolina Code sections 12-21-3441 and 12-21-3610, enacted after the 1989 Act, in 1991 and 1992 respectively. With the exception of section 12-21-3440, the 1989 Act is regulatory in nature. It establishes various rules relating to record keeping, regulation of promoters, location of games, and size of payouts. Section 12-21-3440 both regulates and taxes bingo. Section 12-21-3440(A) creates various classes of bingo license holders and specifies certain rules as to each class, including assessing differing license taxes for the individual classes. Section 12-21-3440(B), strictly a revenue statute, assesses a bingo tax on the various classes of bingo license holders.

The Taxpayers were all licensed bingo operators under the 1989 Act, holding either Class AA or Class B licenses. Under the 1989 Act, Class AA operators were allowed to conduct one bingo session per month with a minimum prize payment of $50,000 and a maximum of $250,000. S.C.Code Ann. § 12-21-3440(A)(1) (Supp.1994). The Taxpayers holding a Class B license were allowed to conduct three bingo games per week, but were limited to a maximum payout of $8,000 per session. S.C.Code Ann. § 12-21-3440(A)(2) (Supp.1994).

The additional statutes challenged, sections 12-21-3441 and 12-21-3610, are both revenue provisions. Section 12-21-3441 assesses an additional bingo tax on holders of Class AA and Class B licenses. Section 12-21-3610 assesses a sales tax on the gross proceeds derived from bingo. The Taxpayers and the Department presented arguments before the circuit court on the constitutional claims on February 7, 2000. The parties did not call any witnesses. On April 6, 2000, the circuit court ruled in favor of the Department on all issues and dismissed the Taxpayers' claims with prejudice. The following issues are raised on appeal:

I. Did the Circuit Court err in failing to find that Article XVII, § 7 of the South Carolina Constitution made bingo a non-lottery game, and, consequently, conferred a constitutional right upon Taxpayers to conduct bingo?

II. Did the Circuit Court err in failing to find the 1989 Act and S.C.Code Ann. §§ 12-21-3441 and 12-21-3610 (Supp.1994) violated Taxpayers' rights to Equal Protection, Due Process, and Free Speech?

III. Did the Circuit Court err in failing to find that Article XVII, § 7 of the South Carolina Constitution impliedly exempts Taxpayers from taxation under the 1989 Act and S.C.Code Ann. §§ 12-21-3441 and 12-21-3610?

IV. Are the Taxpayers claims barred by res judicata?

Law Analysis

I. Right to Conduct Bingo

The Taxpayers argue that the 1974 amendment to Article XVII, § 7 of the South Carolina Constitution made bingo a non-lottery game, and consequently conferred upon them a right to conduct bingo. We disagree.

Article XVII, § 7 of the South Carolina Constitution provides,

No lottery shall ever be allowed or be advertised by newspapers, or otherwise, or its tickets be sold in this State. The game of bingo, when conducted by charitable, religious or fraternal organizations exempt from federal income taxation or when conducted at recognized annual State or county fairs, shall not be deemed a lottery prohibited by this section.

S.C. Const. art. XVII, § 7 (1976) (emphasis added).⁵ When construing the constitution, the Court applies rules similar to those relating to the construction of statutes. Davis v. County of Greenville, 313 S.C. 459, 443 S.E.2d 383 (1994). In interpreting statutes, the Court must give statutory language its plain and ordinary meaning. FOP I,332 S.C. at 499,506 S.E.2d at 496 (citations omitted).

This Court addressed bingo's status as a lottery in Army Navy Bingo, Garrison No. 2196 v. Plowden, 281 S.C. 226, 314 S.E.2d 339 (1984). In Army Navy Bingo, bingo operators challenged the constitutionality of the prize limitations and the residence requirement in S.C.Code Ann. § 12-21-2590, arguing that the provisions violated the Fourteenth Amendment due process clause. In denying any due process violation, the Court held, "[s]ection 7 is not a self-executing constitutional grant of power to conduct bingo. On the contrary, [it] indicates that bingo is no longer constitutionally prohibited." Army Navy Bingo, 281 S.C. at 228, 314 S.E.2d at 340. The Court then concluded,

Bingo is a lottery, and it is gambling. There is no right to conduct bingo under the State Constitution.

Nor is there a fundamental right to gamble protected by the Federal Constitution. In fact, the State's power to suppress gambling is practically unrestrained.

Id. (citations omitted).

The Taxpayers concede that finding that bingo is not a lottery, and, therefore, is not gambling, is central to their argument that the 1989 Act violates their constitutional rights to due process and equal protection. The Taxpayers attempt to circumvent the seemingly clear language to the contrary in Army Navy Bingo by arguing that this Court was not talking about traditional bingo when it said "[b]ingo is a lottery, and it is gambling." 281 S.C. at 228, 314 S.E.2d at 340. The Taxpayers base this contention solely on Army Navy Bingo's citation to Bingo Bank, Inc. v. J.P. Strom, 268 S.C. 498, 234 S.E.2d 881 (1977). In Bingo Bank, the Court addressed whether the game being played qualified as the bingo permitted under the Constitution. The Court found that the game being played in Bingo Bank was not, in fact, the traditional game of bingo contemplated by the Constitution. 268 S.C. at 503,234 S.E.2d at 883. Taxpayers argue, then, that the Court's citation to Bingo Bank in Army Navy Bingo for the proposition that bingo is a lottery and is gambling is misplaced in the context of the traditional bingo contemplated in and permitted by the Constitution.

In our opinion, Taxpayers' argument is unconvincing. The Court's statement in Army Navy Bingo is not a quote from Bingo Bank. Although Bingo Bank involved a game that is not encompassed in the Constitution's definition of bingo, the game in Army Navy Bingo was traditional bingo. Further, the Court repeated this interpretation in Johnson v. Collins Entertainment, Co., 333 S.C. 96, 508 S.E.2d 575 (1998). In Johnson, decided long after the 1974 amendment and Army Navy Bingo, the Court noted that bingo is commonly defined and understood to be a lottery. Johnson, 333 S.C. 96, 508 S.E.2d 575 (citing Encarta 97 Encyclopedia (Microsoft deluxe ed.1996); 2 The New Encyclopedia Brittanica 218 (15th ed.1997)). In his ...