Opinion
2014-09-10
COUNTY OF NASSAU, etc., 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, and Scott R. Wiehle, admitted pro hac vice, of counsel), for appellants Travelocity.com, LLC, Travelocity.com, L.P., 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 brief filed).
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, and Scott R. Wiehle, admitted pro hac vice, of counsel), for appellants Travelocity.com, LLC, Travelocity.com, L.P., 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 brief filed).
MARK C. DILLON, J.P., CHERYL E. CHAMBERS, L. PRISCILLA HALL, and JOSEPH J. MALTESE, JJ.
In an action to enforce certain provisions of the Nassau County Hotel Tax Law, to recover damages for conversion and unjust enrichment, and to impose a constructive trust, the defendants Expedia, Inc., Hotels.com GP, LLC, Hotels.com, L.P., Hotwire, Inc., Travelnow.com, Inc., Travelport, Inc., Trip Network, Inc., doing business as Cheaptickets.com, Internetwork Publishing Corp., doing business as Lodging.com, Orbitz, LLC, Orbitz Worldwide, Inc., Travelocity.com, LLC, Travelocity.com, LP, Site 59.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 the complaint insofar as asserted against them.
ORDERED that the order is modified, on the law, by deleting the provision thereof denying 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 against them, and substituting therefor a provision granting that branch of the motion; as so modified, the order is affirmed, with costs to the plaintiff.
The appellants are online sellers or resellers of hotel and motel accommodations. The appellants allegedly contract with hotels and motels for rooms at negotiated discount rates and then resell the rooms to members of the public at an increased rate. The plaintiff, County of Nassau, imposes a 3% hotel and motel occupancy tax on the daily rental rate for each room in Nassau County, pursuant to section 3 of Title 24 of the Miscellaneous Laws of Nassau County (hereinafter the Hotel Tax), as authorized by New York Tax Law § 1202 (hereinafter the Enabling Act). The plaintiff alleges that the appellants charge consumers the Hotel Tax based on “retail” room rental rates, but improperly remit tax amounts based on the lower, “wholesale” rates at which the appellants obtain the hotel rooms, keeping the difference for themselves. Accordingly, the plaintiff commenced this action seeking to fully enforce the Hotel Tax, to recover damages for conversion and unjust enrichment, and to impose a constructive trust. The plaintiff also moved for class action certification in order to bring this action on behalf of itself and 55 New York local governmental entities which have enacted similar Hotel Tax laws under the Enabling Act since March 1, 1995. The issue of class action certification was decided in the companion appeal decided herewith ( see County of Nassau v. Expedia, Inc., ––– A.D.3d ––––, ––– N.Y.S.2d ––––, 2014 WL 4435996 [Appellate Division Docket No. 2013–04953] ).
The appellants contend that the branch of their motion which was pursuant to CPLR 3211(a)(2) to dismiss the first cause of action seeking enforcement of the Hotel Tax against them for lack of subject matter jurisdiction should have been granted because, inter alia, the Enabling Act required the plaintiff to exhaust certain administrative remedies before judicial intervention could be obtained, and that the plaintiff failed to do so.
In New York, local governments do not have an independent power to tax. The New York Constitution vests the taxing power in the State Legislature and authorizes the Legislature to delegate that power to local governments ( seeN.Y. Const., art. XVI, § 1; City of New York v. State of New York, 94 N.Y.2d 577, 591, 709 N.Y.S.2d 122, 730 N.E.2d 920; Castle Oil Corp. v. City of New York, 89 N.Y.2d 334, 338–339, 653 N.Y.S.2d 86, 675 N.E.2d 840; Sonmax, Inc. v. City of New York, 43 N.Y.2d 253, 257, 401 N.Y.S.2d 173, 372 N.E.2d 9; County Sec. v. Seacord, 278 N.Y. 34, 37, 15 N.E.2d 179). The New York Constitution places fundamental limitations on such delegations. The Legislature must describe with specificity the taxes authorized by any enabling statute ( seeN.Y. Const., art. XVI, § 1; Castle Oil Corp. v. City of New York, 89 N.Y.2d at 339, 653 N.Y.S.2d 86, 675 N.E.2d 840). In turn, local governments can only levy and collect taxes within the expressed limitations of specific enabling legislation ( seeN.Y. Const., art. IX, § 2[c][8]; Matter of United States Steel Corp. v. Gerosa, 7 N.Y.2d 454, 459, 199 N.Y.S.2d 475, 166 N.E.2d 489).
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. Tax Appeals Trib. of State of N.Y., 83 N.Y.2d 240, 244, 609 N.Y.S.2d 144, 631 N.E.2d 86; Matter of American Cyanamid & Chem. Corp. v. Joseph, 308 N.Y. 259, 263, 125 N.E.2d 247; Dun & Bradstreet, Inc. v. City of New York, 276 N.Y. 198, 204, 11 N.E.2d 728; McKinney's Cons. Laws of N.Y., Book 1, Statutes § 313[b] ). Any ambiguity in a tax law should be resolved in favor of the taxpayer and against the taxing authority ( see Debevoise & Plimpton v. New York State Dept. of Taxation & Fin., 80 N.Y.2d 657, 661, 593 N.Y.S.2d 974, 609 N.E.2d 514).
Applying these principles here, contrary to the appellants' contention, the plaintiff was not required to exhaust administrative remedies before commencing this action, and judicial review is not limited to a proceeding pursuant to CPLR article 78 ( see generally Expedia, Inc. v. City of N.Y. Dept. of Fin., 22 N.Y.3d 121, 980 N.Y.S.2d 55, 3 N.E.3d 121; Bankers Trust Corp. v. New York City Dept. of Fin., 1 N.Y.3d 315, 322, 773 N.Y.S.2d 1, 805 N.E.2d 92; City of Goodlettsville, TN v. Priceline.com, Inc., 605 F.Supp.2d 982 [M.D.Tenn.]; City of Charleston, South Carolina v. Hotels.com, LP, 520 F.Supp.2d 757, 771 [D.S.C.] ).
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 for lack of subject matter jurisdiction. Consequently, there is no merit to the additional contention raised by the appellants that the remaining causes of action seeking damages for conversion and unjust enrichment, and to impose a constructive trust, should have been dismissed because they are dependent upon the first cause of action.
The appellants alternatively contend that the remaining causes of action should have been dismissed pursuant to CPLR 3211(a)(7). An action will lie to recover damages for the conversion of money where there is a specific, identifiable fund and an obligation to return or otherwise treat in a particular manner the specific fund in question ( see Lucker v. Bayside Cemetery, 114 A.D.3d 162, 979 N.Y.S.2d 8). The elements of unjust enrichment are that the defendants were enriched, at the plaintiff's expense, and that it is against equity and good conscience to permit the defendants to retain what is sought to be recovered ( see Old Republic Natl. Tit. Ins. Co. v. Luft, 52 A.D.3d 491, 859 N.Y.S.2d 261). “ ‘The essence of unjust enrichment is that one party has received money or a benefit at the expense of another’ ” (Goldman v. Simon Prop. Group, Inc., 58 A.D.3d 208, 220, 869 N.Y.S.2d 125, quoting City of Syracuse v. R.A.C. Holding, 258 A.D.2d 905, 906, 685 N.Y.S.2d 381). Affording the complaint a liberal construction ( see AG Capital Funding Partners, L.P. v. State St. Bank & Trust Co., 5 N.Y.3d 582, 591, 808 N.Y.S.2d 573, 842 N.E.2d 471; Moore v. Liberty Power Corp., LLC, 72 A.D.3d 660, 897 N.Y.S.2d 723), and accepting the allegations in the complaint as true ( see Schwartz v. Schwartz, 55 A.D.3d 897, 866 N.Y.S.2d 573), the plaintiff stated causes of action to recover damages for conversion and unjust enrichment ( see City of Goodlettsville, TN v. Priceline.com, Inc., 605 F.Supp.2d at 998–999; City of Findlay v. Hotels.Com, L.P., 441 F.Supp.2d 855, 864–865 [N.D.Ohio] ).
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 to recover damages for conversion and unjust enrichment insofar as asserted against them.
However, we agree with the appellants that the Supreme Court should have granted that branch of their motion which was pursuant to CPLR 3211(a)(7) to dismiss the cause of action to impose a constructive trust insofar as asserted against them. To obtain the remedy of a constructive trust, a plaintiff generally is required to demonstrate four elements: (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 flowing from a breach of the promise ( see Hall v. McDonald, 115 A.D.3d 646, 981 N.Y.S.2d 551; Kalmon Dolgin Affiliates, Inc. v. Tonacchio, 110 A.D.3d 848, 851, 973 N.Y.S.2d 304). Here, the plaintiff failed to adequately plead a cause of action against the appellants to impose a constructive trust, as it failed to allege the existence of a confidential or fiduciary relationship with them ( see Hall v. McDonald, 115 A.D.3d at 646, 981 N.Y.S.2d 551; Kalmon Dolgin Affiliates, Inc. v. Tonacchio, 110 A.D.3d at 851, 973 N.Y.S.2d 304; Old Republic Natl. Tit. Ins. Co. v. Cardinal Abstract Corp., 14 A.D.3d 678, 790 N.Y.S.2d 143). Therefore, we modify the order appealed from accordingly.