S.C. Dep't of Revenue v. Blue Moon of Newberry, Inc.

• Decision Date: 04 May 2012
• Docket Number: No. 27106.,27106.
• Citation: 397 S.C. 256,725 S.E.2d 480
• Court: South Carolina Supreme Court
• Parties: SOUTH CAROLINA DEPARTMENT OF REVENUE, Respondent, v. BLUE MOON OF NEWBERRY, INC., d/b/a Blue Moon Sports Bar, Petitioner.

397 S.C. 256

725 S.E.2d 480

SOUTH CAROLINA DEPARTMENT OF REVENUE, Respondent,

v.BLUE MOON OF NEWBERRY, INC., d/b/a Blue Moon Sports Bar, Petitioner.

No. 27106.

Supreme Court of South Carolina.

Heard Feb. 8, 2012.

Decided April 4, 2012.

Rehearing Denied May 4, 2012.

Richard J. Breibart, The Law Firm of Richard Breibart, of Lexington, for Petitioner.

Harry A. Hancock, S.C. Dept. of Revenue, of Columbia, for Respondent.

Justice HEARN.

The State Law Enforcement Division (SLED) conducted a sting operation on the Blue Moon Sports Bar, a private club operated by Blue Moon of Newberry, Inc. After SLED's investigation, the Department of Revenue concluded Blue Moon's guest policy violated Section 7–401.4(J) through (K) of the South Carolina Code of Regulations and revoked Blue Moon's liquor license. The Administrative Law Court (ALC) reinstated Blue Moon's license, and the court of appeals reversed. S.C. Dep't of Revenue v. Blue Moon of Newberry, Inc., 387 S.C. 467, 473, 693 S.E.2d 21, 24 (Ct.App.2010). We granted a writ of certiorari and now reverse the decision of the court of appeals.

FACTUAL/PROCEDURAL BACKGROUND

Blue Moon is a sports bar located in Newberry, South Carolina, and it is incorporated as a nonprofit corporation. As such, it is subject to the provisions concerning the sale of alcoholic beverages by nonprofit organizations found in Regulation 7–401.4. Specifically, the regulation states that “[o]nly bona fide members and bona fide guests of members of such organizations may consume alcoholic beverages ... upon the licensed premises.” 1 S.C.Code Ann. Regs. 7–401.4(J) (2011). The regulation further provides, “Bona fide guests shall be limited to those who accompany a member onto the premises or for whom the member has made prior arrangements with the management of the organization.” Id.§ 7–401.4(K).

To test Blue Moon's compliance with these regulations, SLED conducted an operation wherein Agent Quincy Ford went undercover and attempted to gain access to Blue Moon as a guest. Agent Ford's first attempt was rebuffed by Blue Moon's bouncer when Agent Ford admitted he was not a member of the organization. However, the bouncer directed Agent Ford's attention to a sign which contained a telephone number and told Agent Ford that he would be allowed to enter if he called that number.¹

Agent Ford called the number as directed, which was the telephone number for Blue Moon. Steve Malone, who is both a member and employee of Blue Moon, answered Agent Ford's call. It is undisputed that Agent Ford did not know Malone or have any prior relationship with him whatsoever. However, Denise Polifrone, who is Blue Moon's owner and license holder, had given Malone authority to admit people who called as his guests.² Approximately two to three minutes after he spoke with Malone and gave Malone his name, Agent Ford returned to the door. He showed the bouncer his civilian identification and said he had called the number on the sign. The bouncer then let Agent Ford enter the bar after he paid a small cover charge.

Once inside, Agent Ford ordered an alcoholic beverage, paid for it, and consumed a small portion of it. He subsequently called in Agent James Causey, the SLED agent in charge of the operation. Agent Causey arrived and issued Polifrone a citation for permitting someone who was not a bona fide member or guest to consume alcohol on-premises. As a result, the Department revoked Blue Moon's liquor license.³

Blue Moon requested a contested case hearing before the ALC, and the only issue before the court was whether Agent Ford was a bona fide guest within the meaning of Regulation 7–401.4(K). In finding that he was, the ALC concluded there is no requirement that the prior arrangement with management for the admission of the guest be made any specific period of time in advance. The ALC also cited the prior administrative law case of South Carolina Department of Revenue v. Mir, Inc., No. 04–ALJ–17–0409–CC (S.C.Admin.Law.Ct. May 31, 2005), for the proposition that there also need not be any pre-existing social relationship between the member and the guest. Accordingly, the ALC found Agent Ford's conversation with Malone constituted a prior arrangement with management and Agent Ford was thus a bona fide guest within the literal meaning of Regulation 7–401.4(K). The ALC therefore denied the Department's request to revoke Blue Moon's license.

On the Department's appeal to the court of appeals, a majority of the panel first distinguished Mir, Inc. on the ground that it concerned whether the member accompanied the guest onto the premises, not whether prior arrangements were made with management. Blue Moon, 387 S.C. at 472, 693 S.E.2d at 23. The court further held the ALC examined the term “prior arrangement” without regard to the regulation's purpose. See id. According to the court, “[t]he stated purpose of the regulation is to ensure that only bona fide members of private clubs and their bona fide guests purchase and consume alcoholic beverages at those clubs.” Id. at 472–73, 693 S.E.2d at 24. When read in this context, the court held giving Regulation 7–401.4(K) the broad reading given to it by the ALC “would eviscerate that purpose.” Id. at 473, 693 S.E.2d at 24. Hence, the court found the ALC erred in concluding Agent Ford was a bona fide guest and granted the Department's request to revoke Blue Moon's license. Id. Judge Pieper dissented, writing that the Department must abide by the plain language of the regulation it promulgated. Id. at 474, 693 S.E.2d at 24 (Pieper, J., dissenting).

We granted a writ certiorari to review the decision of the court of appeals.

LAW/ANALYSIS

Blue Moon argues the court of appeals erred in holding Agent Ford did not meet the definition of a bona fide guest in Regulation 7–401.4(K). Because we believe the court of appeals erred in going beyond the regulation's plain language, we agree.

“The construction of a regulation is a question of law to be determined by the court.” 2 Am.Jur.2d Administrative Law § 245. We will correct the decision of the ALC if it is affected by an error of law, S.C.Code Ann. § 1–23–380(5)(d) (Supp.2010), and questions of law are reviewed de novo, Town of Summerville v. City of N. Charleston, 378 S.C. 107, 110, 662 S.E.2d 40, 41 (2008). Although our review of these questions is de novo, we will generally give deference to an agency's interpretation of its own regulation. Brown v. Bi–Lo, Inc., 354 S.C. 436, 440, 581 S.E.2d 836, 838 (2003). Nevertheless, we will reject the agency's interpretation if it is contrary to the regulation's plain language. See id.

Regulations are construed using the same canons of construction as statutes. S.C. Ambulatory Surgery Ctr. Ass'n v. S.C. Workers' Comp. Comm'n, 389 S.C. 380, 389, 699 S.E.2d 146, 151 (2010). Accordingly, “[t]he words of a regulation must be given their plain and ordinary meaning without resort to subtle or forced construction to limit or expand the regulation's operation.” Byerly v. Connor, 307 S.C. 441, 444, 415 S.E.2d 796, 799 (1992). Furthermore, the regulation must be construed as a whole rather than read in its component parts in isolation. Spruill v. Richland Cnty. Sch. Dist. 2, 363 S.C. 61, 64, 609 S.E.2d 524, 526 (2005). However, if applying the regulation's plain language would lead to an absurd result, we will interpret the regulation in a manner which avoids the absurdity. See Cabiness v. Town of James Island, 393 S.C. 176, 192, 712 S.E.2d 416, 425 (2011). “A merely conjectural absurdity is not enough; the result must be ‘so patently absurd that it is clear that the [General Assembly] could not have intended such a result.’ ” Id. (quoting Harris v. Anderson Cnty. Sheriff's Office, 381 S.C. 357, 363 n. 1, 673 S.E.2d 423, 426 n. 1 (2009)).

The South Carolina Constitution grants the General Assembly the power to issue alcoholic beverage licenses to two types of establishments: (1) “businesses which engage primarily and substantially in the preparation and serving of meals or furnishing of lodging,” and (2) “certain nonprofit organizations with limited membership not open to the general public.” S.C. Const. art. VIII–A, § 1. The General Assembly has in turn defined a nonprofit organization for these purposes as “an organization not open to the general public, but with a limited membership and established for social, benevolent, patriotic, recreational, or fraternal purposes.” ⁴S.C.Code Ann. § 61–6–20(6) (2009). Similarly, the General Assembly provided that “[a] nonprofit organization which is licensed by the [D]epartment pursuant to the provisions of this article may sell alcoholic liquors by the drink. A member or guest of a member of a nonprofit organization may consume alcoholic liquors sold by the drink upon the premises....” Id.§ 61–6–1600(A).

The Department has interpreted ⁵section 61–6–1600 as being evidence of the General Assembly's intent

that a license shall not be granted to or held by an organization which is, or has been, organized and operated primarily to obtain or hold a license to sell alcoholic beverages, but only to bona fide nonprofit organization with limited membership to which the sale of alcoholic beverages is incidental to the main purpose of the organization.

1 S.C.Code Ann. Regs. 7–401.4(A) (2011).

To that end, the Department promulgated the two subsections of Regulation 7–401.4 at the heart of this case:

J. Only bona fide members and bona fide guests of members of such organizations may consume alcoholic beverages ... upon the licensed premises.

K. Bona fide guests shall be limited to those who accompany a member onto the premises or for whom the member has made prior arrangements with the management of the organization.

The question presently before us is whether Agent Ford was a bona fide guest when he was able to call a number posted near the door and obtain permission to enter from a member with whom he had no prior relationship.

Based on the plain language of Regulation 7–401....