| County of Nassau v Expedia, Inc. |
| 2014 NY Slip Op 06049 [120 AD3d 1178] |
| September 10, 2014 |
| Appellate Division, Second Department |
[*1]
| County of Nassau, on Behalf of Itself and All OthersSimilarly Situated, Respondent, v Expedia, Inc., et al., Appellants, et al.,Defendant. |
Rivkin Radler, LLP, Uniondale, N.Y. (William M. Savino, Stephen J. Smirti, Jr.,Cheryl F. Korman, and Michael C. Cannata of counsel), for appellants, and Kelly Hart& Hallman, LLP, Fort Worth, Texas (Brian S. Stagner, admitted pro hac vice, andScott R. Wiehle, admitted pro hac vice, of counsel), for appellants Travelocity.com,LLC, Travelocity.com, LP, and Site 59.com, LLC (one brief filed).
Carnell T. Foskey, County Attorney, Mineola, N.Y. (Alpa J. Sanghvi of counsel),and Zwerling, Schachter & Zwerling, LLP, Garden City, N.Y. (Robert S. Schachter,Dan Drachler, Sona Shah, and Ana M. Cabassa of counsel), for respondent (one brieffiled).
In an action to enforce certain provisions of the Nassau County Hotel Tax Law, torecover damages for conversion and unjust enrichment, and to impose a constructivetrust, the defendants Expedia, Inc., Hotels.com GP, LLC, Hotels.com, L.P., Hotwire,Inc., Travelnow.com, Inc., Travelport, Inc., Trip Network, Inc., doing business asCheaptickets.com, Internetwork Publishing Corp., doing business as Lodging.com,Orbitz, LLC, Orbitz Worldwide, Inc., Travelocity.com, LLC, Travelocity.com, LP, Site59.com, LLC, Priceline.com, Incorporated, TravelWeb, LLC, and LowestFare.com LLC,appeal from an order of the Supreme Court, Nassau County (Bucaria, J.), dated June 13,2012, which denied their motion pursuant to CPLR 3211 (a) (2) and (7) to dismiss thecomplaint insofar as asserted against them.
Ordered that the order is modified, on the law, by deleting the provision thereofdenying that branch of the appellants' motion which was pursuant to CPLR 3211 (a) (7)to dismiss the cause of action to impose a constructive trust insofar as asserted againstthem, and substituting therefor a provision granting that branch of the motion; as somodified, the order is affirmed, with costs to the plaintiff.
The appellants are online sellers or resellers of hotel and motel accommodations. Theappellants allegedly contract with hotels and motels for rooms at negotiated discountrates and then resell the rooms to members of the public at an increased rate. Theplaintiff, County of Nassau, imposes a 3% hotel and motel occupancy tax on the dailyrental rate for each room in Nassau County, pursuant to section 3 of title 24 of theMiscellaneous Laws of Nassau County (hereinafter the Hotel Tax), as authorized by NewYork Tax Law § 1202 (hereinafter the Enabling Act). The plaintiff allegesthat the appellants charge consumers the Hotel Tax based on "retail" room rental [*2]rates, but improperly remit tax amounts based on the lower,"wholesale" rates at which the appellants obtain the hotel rooms, keeping the differencefor themselves. Accordingly, the plaintiff commenced this action seeking to fully enforcethe Hotel Tax, to recover damages for conversion and unjust enrichment, and to impose aconstructive trust. The plaintiff also moved for class action certification in order to bringthis action on behalf of itself and 55 New York local governmental entities which haveenacted similar Hotel Tax laws under the Enabling Act since March 1, 1995. The issue ofclass action certification was decided in the companion appeal decided herewith (seeCounty of Nassau v Expedia, Inc., 120 AD3d 1181 [2014]).
The appellants contend that the branch of their motion which was pursuant to CPLR3211 (a) (2) to dismiss the first cause of action seeking enforcement of the Hotel Taxagainst them for lack of subject matter jurisdiction should have been granted because,inter alia, the Enabling Act required the plaintiff to exhaust certain administrativeremedies before judicial intervention could be obtained, and that the plaintiff failed to doso.
In New York, local governments do not have an independent power to tax. The NewYork Constitution vests the taxing power in the State Legislature and authorizes theLegislature to delegate that power to local governments (see NY Const, art XVI,§ 1; City of New York v State of New York, 94 NY2d 577, 591[2000]; Castle Oil Corp. v City of New York, 89 NY2d 334, 338-339 [1996];Sonmax, Inc. v City of New York, 43 NY2d 253, 257 [1977]; County Sec. vSeacord, 278 NY 34, 37 [1938]). The New York Constitution places fundamentallimitations on such delegations. The Legislature must describe with specificity the taxesauthorized by any enabling statute (see NY Const, art XVI, § 1;Castle Oil Corp. v City of New York, 89 NY2d at 339). In turn, localgovernments can only levy and collect taxes within the expressed limitations of specificenabling legislation (see NY Const, art IX, § 2 [c] [8]; Matter ofUnited States Steel Corp. v Gerosa, 7 NY2d 454, 459 [1960]).
As a general rule, tax statutes should be strictly construed and limited to their terms,which should not be extended by implication (see Matter of 1605 Book Ctr. v TaxAppeals Trib. of State of N.Y., 83 NY2d 240, 244 [1994]; Matter of AmericanCyanamid & Chem. Corp. v Joseph, 308 NY 259, 263 [1955]; Dun &Bradstreet, Inc. v City of New York, 276 NY 198, 204 [1937]; McKinney's ConsLaws of NY, Book 1, Statutes § 313 [b]). Any ambiguity in a tax lawshould be resolved in favor of the taxpayer and against the taxing authority (seeDebevoise & Plimpton v New York State Dept. of Taxation & Fin., 80NY2d 657, 661 [1993]).
Applying these principles here, contrary to the appellants' contention, the plaintiffwas not required to exhaust administrative remedies before commencing this action, andjudicial review is not limited to a proceeding pursuant to CPLR article 78 (see generally Expedia, Inc. v Cityof N.Y. Dept. of Fin., 22 NY3d 121 [2013]; Bankers Trust Corp. v New York City Dept. of Fin., 1 NY3d315, 322 [2003]; City of Goodlettsville, Tenn. v Priceline.com, Inc., 605 FSupp 2d 982 [MD Tenn 2009]; City of Charleston, S.C. v Hotels.com, LP, 520 FSupp 2d 757, 771 [D SC 2007]).
Accordingly, the Supreme Court correctly denied that branch of the appellants'motion which was to dismiss the first cause of action insofar as asserted against them forlack of subject matter jurisdiction. Consequently, there is no merit to the additionalcontention raised by the appellants that the remaining causes of action seeking damagesfor conversion and unjust enrichment, and to impose a constructive trust, should havebeen dismissed because they are dependent upon the first cause of action.
The appellants alternatively contend that the remaining causes of action should havebeen dismissed pursuant to CPLR 3211 (a) (7). An action will lie to recover damages forthe conversion of money where there is a specific, identifiable fund and an obligation toreturn or otherwise treat in a particular manner the specific fund in question (see Lucker v BaysideCemetery, 114 AD3d 162 [2013]). The elements of unjust enrichment are thatthe defendants were enriched, at the plaintiff's expense, and that it is against equity andgood conscience to permit the defendants to retain what is sought to be recovered (see Old Republic Natl. Tit. Ins. Co.v Luft, 52 AD3d 491 [2008]). " 'The essence of unjust enrichment isthat one party has received money or a benefit at the expense of another' " (Goldman v Simon Prop. Group,Inc., 58 AD3d 208, 220 [2008], quoting City of Syracuse v [*3]R.A.C. Holding, 258 AD2d 905, 906 [1999]).Affording the complaint a liberal construction (see AG Capital Funding Partners, L.P. v State St. Bank & TrustCo., 5 NY3d 582, 591 [2005]; Moore v Liberty Power Corp., LLC, 72 AD3d 660 [2010]),and accepting the allegations in the complaint as true (see Schwartz v Schwartz, 55AD3d 897 [2008]), the plaintiff stated causes of action to recover damages forconversion and unjust enrichment (see City of Goodlettsville, Tenn. v Priceline.com,Inc., 605 F Supp 2d at 998-999; City of Findlay v Hotels.Com, L.P., 441 FSupp 2d 855, 864-865 [ND Ohio 2006]).
Accordingly, the Supreme Court correctly denied that branch of the appellants'motion which was pursuant to CPLR 3211 (a) (7) to dismiss the causes of action torecover damages for conversion and unjust enrichment insofar as asserted againstthem.
However, we agree with the appellants that the Supreme Court should have grantedthat branch of their motion which was pursuant to CPLR 3211 (a) (7) to dismiss thecause of action to impose a constructive trust insofar as asserted against them. To obtainthe remedy of a constructive trust, a plaintiff generally is required to demonstrate fourelements: (1) a fiduciary or confidential relationship between the parties, (2) a promise,(3) a transfer of an asset in reliance upon the promise, and (4) unjust enrichment flowingfrom a breach of the promise (see Hall v McDonald, 115 AD3d 646 [2014]; Kalmon Dolgin Affiliates, Inc. vTonacchio, 110 AD3d 848, 851 [2013]). Here, the plaintiff failed to adequatelyplead a cause of action against the appellants to impose a constructive trust, as it failed toallege the existence of a confidential or fiduciary relationship with them (see Hall vMcDonald, 115 AD3d at 646; Kalmon Dolgin Affiliates, Inc. v Tonacchio,110 AD3d at 851; Old RepublicNatl. Tit. Ins. Co. v Cardinal Abstract Corp., 14 AD3d 678 [2005]). Therefore,we modify the order appealed from accordingly. Dillon, J.P., Chambers, Hall andMaltese, JJ., concur.