NO. COA13-594

NORTH CAROLINA COURT OF APPEALS

Filed: 19 August 2014

WAKE COUNTY,

Plaintiff,

v. Wake County

Master File No. 06 CVS 16256

HOTELS.COM, L.P., et al.,

Defendants.

BUNCOMBE COUNTY,

Plaintiff,

v. Buncombe County

No. 07 CVS 585

HOTELS.COM, L.P., et al.,

Defendants.

DARE COUNTY,

Plaintiff,

v. Dare County

No. 07 CVS 56

HOTELS.COM, L.P., et al.,

Defendants.

MECKLENBURG COUNTY,

Plaintiff,

v. Mecklenburg County

No. 08 CVS 741

HOTELS.COM, L.P., et al.,

Defendants.
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Appeal by plaintiffs from Order and Opinion filed on 19 

December 2012 by Judge Calvin E. Murphy in Special Superior 

Court for Complex Business Cases. Heard in the Court of Appeals 

19 November 2013.

Ward and Smith, P.A., by Gary J. Rickner and Joseph A. 

Schouten; and Law Office of Michael Y. Saunders, by Michael 

Y. Saunders, for plaintiff-appellants.

Williams Mullen, by Charles B. Neely, Jr., Christopher G. 

Browning, Jr., Nancy S. Rendleman, Robert W. Shaw; Kelly 

Hart & Hallman, LLP, by Brian S. Stagner, pro hac vice, and 

Marcus G. Mungioli, pro hac vice; Skadden, Arps, Slate, 

Meagher & Flom LLP, by Darrel J. Hieber, pro hac vice, and 

Randolph K. Herndon, pro hac vice, for defendant-appellees.

BRYANT, Judge.

Where the trial court did not err in concluding that 

defendants are not subject to plaintiffs’ occupancy tax and 

where the trial court did not err in concluding that defendants 

were not required to collect and remit an occupancy tax, we 

affirm the trial court’s grant of summary judgment in favor of 

defendants. Where the trial court dismissed plaintiffs’ claim 

seeking recovery for collected but not remitted taxes on the 

basis of a contractual obligation because of plaintiffs’ failure 

to provide sufficient notice of the claim in their pleadings, we 

affirm the dismissal. Lastly, where the trial court granted
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summary judgment in favor of defendants on plaintiffs’ claims 

for an accounting, conversion, and seeking to impose a 

constructive trust, we affirm.

Defendants are approximately eleven online travel companies 

(OTC) that operate websites which allow consumers to select and 

pay for hotel rooms directly online using a credit card. 

Consumers can make reservations with airlines, car rental 

companies, and cruise lines in addition to hotels. Defendants 

negotiate and contract with hotels to obtain rooms at discount 

rates, these rooms are then sold to customers at a rate the 

hotel is obligated to honor. Consumers who take advantage of 

this offer never pay the hotel directly, only the OTC.

Plaintiffs are four counties—Wake, Dare, Buncombe, and 

Mecklenburg—who are required by North Carolina statutes and 

local ordinances to collect and remit an occupancy tax based on 

a percentage of the receipts derived from the rental of hotel 

rooms in their respective counties. Plaintiffs claim that 

defendants charge consumers a rate higher than the discount rate 

negotiated with the hotel yet only remit to plaintiffs a tax 

amount based on the reduced rate. Plaintiffs contend defendants 

are liable for substantial unremitted tax amounts.

Procedural History
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We discuss the procedural history for the lawsuits 

initially brought by each county.

Wake County

In Wake County Superior Court on 2 November 2006, Wake 

County filed a verified complaint and action for declaratory 

judgment against defendants Hotels.com, LP; Hotwire, Inc.; Trip 

Network, Inc. (d/b/a Cheap Tickets.com); Expedia, Inc.;

Internetwork Publishing Corp. (D/B/A Lodging.com); 

Lowestfare.com, Inc.; Maupin-Tour Holding, LLC1; Travelport, Inc. 

(f/k/a Cendant Travel Distribution Services Group, Inc.)2; 

Orbitz, LLC; Priceline.com, Inc.; Site59.com, LLC; 

Travelocity.com, LP; Travelweb LLC; and Travelnow.com, Inc.3

Wake County asserted that the action was to collect occupancy 

taxes and penalties due Wake County from gross receipts 

defendants derived from the rental of rooms, lodging, and other 

 

1 On 6 November 2007, Wake County filed notice of voluntary 

dismissal without prejudice of its claims against defendant 

Maupin-Tour Holding, LLC.

2 On 25 January 2008, Wake County filed notice of voluntary 

dismissal without prejudice of its claims against defendant 

Travelport, Inc. (f/k/a Cendant Travel Distribution Services 

Group, Inc.).

3 On 11 December 2011, Wake County filed notice of voluntary 

dismissal without prejudice of its claims against Travelnow.com, 

Inc.
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accommodations furnished by hotels, motels, and similar places 

located in Wake County. By county ordinance, Wake County 

imposed a six percent “room occupancy tax” on the gross proceeds 

derived from the rental of hotel rooms and other accommodations 

within the county.4 Wake County sought a declaratory judgment 

and injunction declaring that defendants’ actions subjected 

defendants to payment of the occupancy tax. Wake asserted the 

following: violation of the room occupancy tax ordinance; 

conversion; imposition of a constructive trust; a demand for 

accounting; unfair and deceptive trade practices; agency; and 

claim for statutory penalties pursuant to Wake County 

ordinances. Wake County alleged damages in excess of 

$1,000,000.00 annually.

Dare County

In Dare County Superior Court, on 26 January 2007, Dare 

County filed a verified complaint and action for Declaratory 

Judgment against the identical entities named in the Wake County 

 

4 “The County of Wake hereby imposes and levies a tax of six 

percent (6%) of the gross receipts derived by any person, firm, 

corporation, or association from the rental of any room, lodging 

or accommodation furnished by a hotel, motel, inn, tourist camp, 

or similar place within the County that is subject to the State 

sales tax imposed under Section 105-164.4(a)(3) of the North 

Carolina General Statutes.” WAKE COUNTY, N.C., R-91-107 ' 1 

(1991).
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complaint.

5,6,7 Dare County, like Wake County, asserted that the 

action was to collect occupancy taxes and penalties due Dare 

County from gross receipts defendants derived from the rental of 

rooms, lodging, and other accommodations furnished by hotels, 

motels, and similar places located in Dare County. Dare County 

imposed a five percent “room occupancy tax” on the gross 

proceeds from the rental of hotel rooms and other accommodations 

within the county.8 Like Wake County, Dare County sought a 

 

5 On 20 August 2007, Dare County filed notice of voluntary 

dismissal without prejudice of its claims against Maupin-Tour 

Holding, LLC.

6 On 7 December 2007, Dare County filed notice of dismissal 

without prejudice of its claims against Travelnow.com, Inc.

7 On 1 February 2008, Dare County filed notice of voluntary 

dismissal without prejudice of its claims against Travelport, 

Inc. (f/k/a Cendant travel Distribution Services Group, Inc.).

8 “There is hereby levied in the County of Dare a room occupancy 

tax of three per cent [sic] (3%) on the gross receipts derived 

from the rental of any room, lodging, or similar accommodation 

subject to sales tax under G.S. 105-164.4(a)(3).” DARE COUNTY, 

N.C., Resolution 91-9-26 ' 1 (1992).

“There is hereby levied within Dare County a room occupancy 

and tourism development tax of one per cent [sic] (1%) of the 

gross receipts derived from the rental of any room, lodging, or 

similar accommodation subject to sales tax under G.S. 105-

164.4(a)(3) . . . .” DARE COUNTY, N.C., Resolution 91-9-27 ' 1 

(1992).

“Whereas, the General Assembly of North Carolina . . . has 

authorized the Dare County Board of Commissioners to levy a 

supplemental room occupancy tax of 1% of the gross receipts 
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declaratory judgment and injunction declaring that defendants’

actions subjected defendants to payment of the occupancy tax. 

Dare asserted the following: violation of the room occupancy tax 

ordinance; conversion; imposition of a constructive trust; a 

demand for accounting; unfair and deceptive trade practices; 

agency; and claim for statutory penalties pursuant to enabling 

legislation for the Dare County ordinance enacted by the North 

Carolina General Assembly. Dare County alleged damages in 

excess of $1,000,000.00 annually.

Buncombe County

In Buncombe County Superior Court on 1 February 2007, 

Buncombe County filed a declaratory judgment action against 

Hotels.com9; Hotels.com, LP10; Hotels.com GP, LLC; Hotwire, Inc.; 

 

derived from the rental of any room, lodging, or similar 

accommodations subject to sales tax under G.S. 105-164.4(a)(3) . 

. . located in Dare County . . . the Dare County Board of 

Commissioners desires to levy the said 1% supplemental occupancy 

tax . . . .” DARE COUNTY, N.C., Resolution implementing 

supplemental occupancy tax (Dec. 3, 2001).

9 On 4 April 2007 Buncombe County filed notice of dismissal 

without prejudice of its claims against Hotels.com; Orbitz.Inc.; 

Priceline.com, LLC; Site59.com, LLC; Travelocity.com, Inc.;

Travelnow.com, Inc.; Cheap Tickets. Inc.; Sabre, Inc.; and 

Travelweb, Inc.

10 On 10 December of 2007, Buncombe County filed notice of 

dismissal without prejudice its claims against Hotels.com GP, 

LLC.
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Trip Network, Inc., d/b/a Cheaptickets.com; Travelport, Inc., 

(f/k/a Cendant Travel Distribution Services Group, Inc.)

11; 

Expedia, Inc.; Internetwork Publishing Corp., d/b/a Lodging.com; 

Lowestfare.com, Inc.; Orbitz, Inc.; Orbitz, LLC; Priceline.com, 

Inc.; Priceline.com LLC; Sites59.com, LLC; Travelweb, Inc.; 

Travelnow.com, Inc.; Cheap Tickets, Inc.; and Sabre, Inc. 

Buncombe County sought “a declaratory judgment concerning its 

power, privilege, and right to audit and collect from [] 

defendants the North Carolina Occupancy Tax, N.C.G.S. 153A-155 . 

. . .” Buncombe County alleged that its ordinances imposed a 

room occupancy and tourism development tax on the gross receipts 

derived from the rental of any room, lodging, or similar 

accommodation furnished by any hotel, motel, inn, tourist camp, 

or other similar place within the county.12 On the date the 

 

11 On 12 February 2008 Buncombe County filed notice of dismissal 

without prejudice of its claims against Travelport, Inc. (f/k/a 

Cendent Travel Distribution Services Group, Inc.).

12 In its declaratory judgment action, Buncombe County asserts 

that on 23 August 1983 by Resolution #17680, the Buncombe County 

Board of Commissioners “enacted a two percent (2%) room 

occupancy and tourism development tax on the gross receipts 

derived from the rental of any room, lodging, or similar 

accommodation furnished by any hotel, motel, inn, tourist camp, 

or other similar place within the County”; on 26 August 1986, 

“the Commissioners by Resolution #18510 enacted and adopted an 

additional one percent (1%) occupancy tax”; and on 19 June 2001, 

the “Commissioners enacted an additional one percent (1%) room 

occupancy tax . . . .”
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declaratory judgment action was filed, the room occupancy tax 

was four percent.

Mecklenburg County

In Mecklenburg County Superior Court on 14 January 2008, 

Mecklenburg County filed a verified complaint and action for 

declaratory judgment against the same entities named in the Wake 

County complaint with the exception of Maupin-Taylor Holding, 

LLC, and Travelnow.com, LLC.

13 Mecklenburg County asserted that 

the action was to declare the rights of the parties concerning 

taxes and penalties due to Mecklenburg County from receipts 

realized by defendants derived from the rental of rooms, lodging 

and other accommodations furnished by hotels, motels, and 

similar places located in Mecklenburg County. Mecklenburg 

County alleged that at the time the complaint was filed, it 

imposed an eight percent “room occupancy tax” and defendants 

failure to remit the tax owed deprived Mecklenburg County of 

more than $1,000,000.00 annually.14 In addition to its request 

 

13 On 4 February 2008, Mecklenburg County filed notice of 

voluntary dismissal without prejudice of its claim against 

Travelport Americas, LLC (f/k/a Cendant Travel Distribution 

Group, Inc.).

14 “Mecklenburg County hereby levies a room occupancy tax of six 

percent (6%) of the receipts, net of any taxes or discounts, 

derived from the rental of any room, lodging, or accommodation 
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for an injunction, Mecklenburg County asserted the following 

claims: violation of occupancy tax ordinances; conversion; 

imposition of constructive trust; demand for accounting; unfair 

and deceptive trade practices; agency; and a claim for statutory 

penalties pursuant to both the Mecklenburg County tax ordinance 

and North Carolina General Statutes.

All defendants filed motions to have their respective 

actions designated as complex business cases. Thereafter, Chief 

Justice Sarah Parker issued orders designating each action as a 

complex business case.

 

furnished by a hotel, motel, inn, tourist camp, or similar place 

within Mecklenburg County that is subject to sale tax imposed by 

the State of North Carolina under Section 105-164.4(a)(3) of the 

North Carolina General Statutes.” MECKLENBURG COUNTY, N.C., Amended 

and Restated Mecklenburg County Ordinance to impose and levy a 

room occupancy tax and a prepared food and beverage tax (Sept. 

1, 1990).

“Mecklenburg County hereby levies a room occupancy tax of 

two percent (2%) of receipts, net of any taxes or discounts, 

derived from the rental of any room, lodging, or accommodation 

furnished by a hotel, motel, inn, tourist camp, or similar place 

within Mecklenburg County that is subject to sales tax imposed 

by the State of North Carolina under Section 105-164.4(a)(3) of 

the North Carolina General Statutes. This room occupancy tax is 

. . . in addition to the six percent (6%) Room Occupancy Tax 

previously levied by the Mecklenburg County Board of 

Commissioners which is in effect and remains in full force and 

effect.” MECKLENBURG COUNTY, N.C., Mecklenburg ordinance to impose 

and levy a two percent room occupancy tax (Hall of Fame Complex 

Tax) (March 21, 2006).
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On 4 April 2007, Special Superior Court Judge Albert Diaz 

of the North Carolina Business Court was appointed to preside 

over the designated complex business cases and granted 

defendants’ motions to consolidate the actions filed in Buncombe 

County, Dare County, and Wake County for pretrial matters. 

Thereafter, Mecklenburg County’s complaint was consolidated and 

joined with the other actions.

On 1 November 2010, all parties filed motions for summary 

judgment under seal; plaintiffs filed a consolidated motion as 

did defendants.

On 4 February 2011, a summary judgment hearing was held

before the Honorable Calvin E. Murphy, Special Superior Court 

Judge presiding in the North Carolina Business Court. After 

considering the parties’ motions and briefs, including 

supporting authority and arguments of counsel, the trial court 

granted defendants’ motion for summary judgment and denied 

plaintiffs’ motion for summary judgment. Plaintiffs appeal.

_____________________________________

On appeal, plaintiffs raise the following questions: (I) 

whether the trial court erred in concluding that defendants have 

no liability under the ordinances; (II) concluding that 

defendants are not contractually obligated to collect and remit 
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the occupancy tax; (III) concluding that there was no legal 

support for plaintiffs’ collected but not remitted claim; and 

(IV) dismissing plaintiffs’ claims for accounting, conversion, 

and constructive trust.

Standard of Review

“We review a trial court's order granting summary judgment 

de novo, viewing the evidence in the light most favorable to the 

nonmoving party. We are to determine whether there is any 

genuine issue of material fact and whether the moving party is 

entitled to a judgment as a matter of law.” Adkins v. Stanly 

Cnty. Bd. of Educ., 203 N.C. App. 642, 644—45, 692 S.E.2d 470, 

472 (2010) (citation and quotations omitted).

I

Plaintiffs first argue that the trial court erred in 

determining defendants have no liability under the respective 

ordinances of Wake, Dare, Buncombe, and Mecklenburg Counties for 

failure to collect and remit an occupancy tax on the sale price 

defendants impose on consumers. We disagree.

The respective ordinances of Wake, Dare, Buncombe, and 

Mecklenburg Counties impose a tax on the gross receipts derived 

from the rental of any room, lodging or accommodation furnished 

by a hotel, motel, inn, tourist camp, or “similar place” that is 
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subject to the State sales tax imposed under General Statutes, 

section 105-164.4(a)(3).

In its 19 December 2012 order, the trial court reasoned 

that “[t]o determine whether the Defendants are obligated to pay 

the Occupancy Tax under the counties’ ordinances or resolutions, 

the Court must decide ‘what’ and ‘who’ is taxed.” The court 

reasoned that as to the “who” is taxed, Mecklenburg and Wake 

counties impose the responsibility of collection upon the 

“operator of a taxable establishment.” Dare and Buncombe 

counties impose the responsibility of tax collection upon the 

“operator of a business subject to a room occupancy tax.” The 

court concluded that defendants “can not [sic] be classified as 

operators of ‘taxable establishments’ or ‘businesses subject to 

a room occupancy tax’ under any of Plaintiff’s Occupancy Tax 

ordinances or resolutions, and are thus, not subject to the 

counties’ Occupancy Taxes.”

Plaintiffs contend the trial court violated the principle

of statutory construction that all parts of a statute must be 

given effect and thereby rendered critical sections of the 

ordinances meaningless. Specifically, plaintiffs contend that 

as to “who” is taxed, the ordinances and enabling legislation 

make clear that the tax is levied against the occupant of the 
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room. As to “what” is taxed, the ordinances establish that the 

levy is applied to the gross receipts derived from the rental of 

the accommodation.

When construing legislative provisions, 

this Court looks first to the plain meaning 

of the words of the statute itself:

When the language of a statute is clear 

and without ambiguity, it is the duty 

of this Court to give effect to the 

plain meaning of the statute, and 

judicial construction of legislative 

intent is not required. However, when 

the language of a statute is ambiguous, 

this Court will determine the purpose 

of the statute and the intent of the 

legislature in its enactment.

State v. Ward, 364 N.C. 157, 160, 694 S.E.2d 729, 731 (2010)

(quoting Diaz v. Div. of Soc. Servs., 360 N.C. 384, 387, 628 

S.E.2d 1, 3 (2006)).

“A county may impose taxes only as specifically authorized 

by act of the General Assembly.” N.C. Gen. Stat. ' 153A-146 

(2005). Our General Assembly has authorized Buncombe, Dare, 

Mecklenburg, and Wake counties to impose room occupancy taxes

pursuant to appropriate county ordinances and resolutions. See

1991 N.C. Sess. Laws ch. 594 (Wake); 1985 N.C. Sess. Laws ch. 

449 (Dare); and 1983 N.C. Sess. Laws. ch. 908, parts IV and VI

(Mecklenburg and Buncombe). The General Assembly limited the 

applicability of the occupancy tax to gross receipts derived 
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from rental transactions also subject to our State sales tax. 

See 2001 N.C. Sess. Laws ch. ' 7.1 (“The Dare County Board of 

Commissioners may levy a room occupancy tax . . . [on] the gross 

receipts derived from the rental of the following in Dare 

County: (1) Any room, lodging, or similar accommodation subject 

to sales tax under G.S. 105-164.4(a)(3)[.]” (revisions 

omitted)); 2001 N.C. Sess. Laws ch. 162, ' 1 (“The Board of 

Commissioners of Buncombe County may levy a room occupancy and 

tourism development tax . . . [on] the gross receipts derived 

from the rental of accommodations within the county that are 

subject to sales tax imposed by the State under G.S. 

105-164.4(a)(3).” (emphasis and revisions omitted)); 1989 N.C. 

Sess. Laws ch. 821, ' 1 (“Mecklenburg County may, by resolution 

of its Board of Commissioners, levy a room occupancy tax . . . 

[on] the gross receipts derived from the rental of any room, 

lodging, or accommodation furnished by a hotel, motel, inn, 

tourist camp, or similar place within the county that is subject 

to sales tax imposed by the State under G.S. 105-164.4(a)(3).”); 

and 1991 N.C. Sess. Laws ch. 594, ' 4 (“The Wake County Board of 

Commissioners may, by resolution, levy a room occupancy tax . . 

. [on] the gross receipts derived from the rental of any room, 

lodging, or accommodation furnished by a hotel, motel, inn, 
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tourist camp, or similar place within the county that is subject 

to the State sales tax imposed under G.S. 105-164.4(a)(3).”). 

To determine whether the gross receipts derived from the rentals 

in which defendants engage are subject to the occupancy tax, we 

must consider whether the gross receipts are subject to the 

State sales tax in accordance with our General Statutes, section 

105-164.4(a)(3).

Section 105-164.4 (“Tax imposed on retailers”) of the North 

Carolina General Statutes, in pertinent part, states the 

following:

(a) . . . A privilege tax is imposed on a 

retailer . . . [on] the retailer's net 

taxable sales or gross receipts, as 

appropriate.

. . .

(3) Operators of hotels, motels, 

tourist homes, tourist camps, and 

similar type businesses . . . are 

considered retailers under this 

Article. A tax at the general rate of 

tax is levied on the gross receipts 

derived by these retailers from the 

rental of any rooms, lodgings, or 

accommodations furnished to transients 

for a consideration.

N.C. Gen. Stat. ' 105-164.4(a)(3) (2005) (effective for sales 

made on or after July 1, 2007).

Whether the gross receipts derived from the rentals in 
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which defendants engage are subject to the occupancy tax hinges 

on whether defendants are “retailers” within the meaning of 

section 105-164.4(a)(3). See id. (“A privilege tax is imposed 

on . . . the retailer’s net taxable sales or gross receipts . . 

. . Operators of hotels, motels, tourist homes, tourist camps, 

and similar type businesses . . . are considered retailers under 

this Article.”).

The trial court found that plaintiffs did not contend 

defendants were operators of hotels, motels, tourist homes, or 

tourist camps. Therefore, the court considered only whether 

defendants were operators of “similar type businesses.”

In addressing this issue, we note with favor the reasoning 

of the Fourth Circuit Court of Appeals in Pitt Cnty. v. 

Hotels.com, GP, LLC, 553 F.3d 308 (4th Cir. 2009), considering

“whether the phrase ‘operators of hotels, motels, tourist homes, 

tourist camps, and similar type businesses’ in § 105–164.4(a)(3) 

in the North Carolina sales tax statute applies to online travel 

companies.” Id. at 313. In considering whether OTC and hotels 

operated “similar type businesses,” the Court found applicable 

the principle of ejusdem generis, the canon of statutory 

construction standing for the proposition that “where general 

words follow a designation of particular subjects or things, the 
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meaning of the general words will ordinarily be presumed to be, 

and construed as, restricted by the particular designations and 

as including only things of the same kind, character and nature 

as those specifically enumerated.” Id. (citing Smith v. Smith, 

314 N.C. 80, 331 S.E.2d 682, 686–87 (1985)); see also State ex 

rel. Utilities Comm'n v. Envtl. Def. Fund, 214 N.C. App. 364, 

368, 716 S.E.2d 370, 373 (2011) (“North Carolina courts have 

followed this explanation of how the doctrine of ejusdem generis

should be applied by employing the doctrine when a list of 

specific terms is followed by a general term. See Liborio v. 

King, 150 N.C. App. 531, 536–37, 564 S.E.2d 272, 276 (2002) 

(interpreting the term “misrepresentation” to be limited to 

knowing and intentional behavior, where the term followed the 

words fraud and deception); [Smith, 314 N.C. at 87, 331 S.E.2d 

at 687] (interpreting a provision allowing the court to consider 

“any other factor which the court finds to be just and proper” 

to be limited to economic factors, where the provision followed 

eleven other provisions having to do with the economy of the 

marriage); [State v. Lee, 277 N.C. 242, 244, 176 S.E.2d 772, 774 

(1970)] (interpreting the phrase “or other like weapons” to be 

limited to automatic or semiautomatic weapons, where the phrase 

followed a specific list of automatic and semiautomatic 
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weapons).”)).

In section 105-164.4(a)(3), the phrase “similar type 

businesses” follows the list: “hotels, motels, tourist homes, 

[and] tourist camps[.]” N.C.G.S. ' 105-164.4(a)(3). A “hotel” 

is defined as “[a]n establishment that provides lodging and usu

[sic]. Meals and other services for travelers and other paying 

guests.” AMERICAN HERITAGE COLLEGE DICTIONARY 658 (3d ed. 1993). A 

motel is “[a]n establishment that provides lodging for motorists

in rooms usu. having direct access to a parking area.” Id. at

890. A “tourist home” is “a house in which rooms are available 

for rent to transients.” Tourist home definition, merriamwebster.com, http://www.merriamwebster.com/dictionary/tourist%20home (last visited August 11, 

2014). We were unable to find a definition for “tourist camp,”; 

however, we note that “tourist” is defined as “[o]ne who travels 

for pleasure,” and “camp” is defined as “[a] place where tents, 

huts, or other temporary shelters are set up . . . . [, or] [a] 

place in the country that offers simple group accommodations and 

organized recreation or instruction.” AMERICAN HERITAGE COLLEGE

DICTIONARY 202, 1431. A common characteristic of such 

establishments is that they are physical structures with rooms 

or at least physical locations. Per section 105-164.4(a)(3), 
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the “operator” of such an establishment is a “retailer.” 

“Operator” is defined as “[t]he owner or manager of a business 

or industrial enterprise.” AMERICAN HERITAGE COLLEGE DICTIONARY 957. 

Plaintiffs do not contend that defendants are owners or 

managers of the establishments providing accommodations; rather,

plaintiffs argue that this Court should interpret the word 

“business” broadly. However, such an analysis would ignore the 

requirements of section 105-164.4(a)(3), that defendants be 

operators of “similar type businesses.” We hold that defendants 

are not operators of hotels, motels, tourist homes, or tourist 

camps within the meaning of section 105-164.4(a)(3). This 

holding is consistent with the reasoning of the trial court and 

the Pitt Court. See Pitt Cnty., 553 F.3d at 313 (hotels, 

motels, tourist homes, and tourist camps – “all provide physical 

establishments . . . where guests can stay. A business that 

arranges for the rental of hotel rooms over the internet, but 

that does not physically provide the rooms, is not a business 

that is of a similar type to a hotel, motel, or tourist home or 

camp.”). Defendants are neither operators nor retailers within 

the meaning of section 105-164.4(a)(3). See N.C.G.S. ' 105-

164.4(a)(3) (“A privilege tax is imposed on . . . the retailer’s 

net taxable sales or gross receipts . . . . Operators of 
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hotels, motels, tourist homes, tourist camps, and similar type 

businesses . . . are considered retailers under this Article.”); 

see also Pitt Cnty., 553 F.3d at 314 (holding that an online 

travel company is not a retailer within the plain meaning of 

General Statutes, section 105-164.4(a)(3)).

Applying our holding that defendants are not “retailers”

within the meaning of General Statutes, section 105-

164.4(a)(3)15, we must also conclude that defendants’ gross 

 

15 We note that pursuant to 2009 N.C. Sess. Laws 2010-31, '

31.6(a) (effective July 1, 2010), N.C. Gen. Stat. ' 105-

164.4(a)(3) was re-written. As re-written, section 105-

164.4(a)(3) includes the following language:

Gross receipts derived from the rental of an 

accommodation include the sales price of the 

rental of the accommodation. . . . The 

sales price of the rental of an 

accommodation marketed by a facilitator 

includes charges designated as facilitation 

fees and any other charges necessary to 

complete the rental.

A person who provides an accommodation that 

is offered for rent is considered a retailer 

under this Article. A facilitator must 

report to the retailer with whom it has a 

contract the sales price a consumer pays to 

the facilitator for an accommodation rental 

marketed by the facilitator. A retailer must 

notify a facilitator when an accommodation 

rental marketed by the facilitator is 

completed and, within three business days of 

receiving the notice, the facilitator must 

send the retailer the portion of the sales 

price the facilitator owes the retailer and 
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receipts are not subject to the State sales tax under section 

105-164.4(a)(3) (“A tax . . . is levied on the gross receipts 

derived by these retailers . . . .”). Thus, the gross receipts 

defendants derive from the rentals are not subject to 

plaintiffs’ room occupancy tax. See 2001 N.C. Sess. Laws ch. 

439 ' 7.1; 2001 N.C. Sess. Laws ch. 162 ' 1; 1991 N.C. Sess. 

Laws ch. 594, ' 4; and 1989 N.C. Sess. Laws ch. 821, ' 1. 

Because the trial court did not err in determining that 

defendants have no liability under the respective ordinances of 

Wake, Dare, Buncombe, and Mecklenburg Counties for failure to 

collect and remit an occupancy tax on the sale price defendants 

impose on consumers, plaintiffs’ argument is overruled.

II

Plaintiffs next argue that the trial court erred in 

 

the tax due on the sales price.

. . .

The following definitions apply in this 

subdivision:

. . .

b. Facilitator. – A person who is not a 

rental agent and who contracts with a 

provider of an accommodation to market the

accommodation and to accept payment from the 

consumer for the accommodation.

2009 N.C. Sess. Laws ch. 2010-31, '31.6(a).
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determining that defendants are not contractually obligated to 

collect and remit the occupancy tax. We disagree.

In its order, the trial court concluded that as to a 

recovery based on a theory of contractual undertaking,

“Plaintiffs failed to provide sufficient notice of the events or 

transactions which produced the claim to enable the adverse 

party to understand the nature of it and the basis for it.” The 

court went on to reason that even if it were to consider 

plaintiffs’ claim for recovery under a theory of contractual 

undertaking, “it would [] have to acknowledge that there is no 

legal support for such a theory in North Carolina’s case law.” 

For these reasons, the trial court granted defendants’ motion to 

dismiss the claim.

“The grant of a motion to dismiss is reviewed de novo on 

appeal.” Hayes v. Peters, 184 N.C. App. 285, 287, 645 S.E.2d 

846, 847 (2007) (citation omitted).

Pursuant to General Statutes, section 1A-1, Rule 8,

[a] pleading which sets forth a claim for 

relief . . . shall contain

(1) A short and plain statement of the claim 

sufficiently particular to give the court 

and the parties notice of the transactions, 

occurrences, or series of transactions or 

occurrences, intended to be proved showing 

that the pleader is entitled to relief and
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(2) A demand for judgment for the relief to 

which he deems himself entitled.

N.C. Gen. Stat. ' 1A-1, Rule 8(a) (2013). By enacting section 

1A-1, Rule 8(a), our General Assembly adopted the concept of 

notice pleading. See Sutton v. Duke, 277 N.C. 94, 100, 176 

S.E.2d 161, 164 (1970). Under notice pleading, “a statement of 

claim is adequate if it gives sufficient notice of the claim 

asserted to enable the adverse party to answer and prepare for 

trial, to allow for the application of the doctrine of res 

judicata, and to show the type of case brought.” Id. at 102, 

176 S.E.2d at 165 (citation omitted). “Such simplified notice 

pleading is made possible by the liberal opportunity for 

discovery and the other pretrial procedures established by the 

Rules to disclose more precisely the basis of both claim and 

defense and to define more narrowly the disputed facts and 

issues.” Pyco Supply Co., Inc. v. Am. Centennial Ins. Co., 321 

N.C. 435, 442—43, 364 S.E.2d 380, 384 (1988) (citation omitted). 

“Despite the liberal nature of the concept of notice pleading, a 

complaint must nonetheless state enough to give the substantive 

elements of at least some legally recognized claim . . . .” 

Hayes v. Peters, 184 N.C. App. 285, 287, 645 S.E.2d 846, 847 

(2007) (citation and quotations omitted).

Plaintiffs contend defendants had sufficient notice of 
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plaintiffs’ contractual obligation theory from the complaints 

and plaintiffs’ summary judgment trial briefs.

In their brief to this Court, plaintiffs combine and point 

to five allegations scattered throughout the complaint filed by 

Mecklenburg County and argue the allegations are sufficient to 

provide defendants with notice of plaintiffs’ contractual 

obligation theory.

Mecklenburg County’s Complaint alleges that: 

(1) Defendants contract with local hotels 

for rooms at negotiated discounted rates and 

“charge and collect the Tax from occupants 

at the time of the sale based on the marked 

up room rates”; (2) Defendants were 

“authorized to act on behalf of the hotels”; 

(3) Defendants, as “agents” for the hotels, 

“were required to collect the Tax from the 

consumers of the rooms”; (4) Defendants, as 

agents for the hotels, have collected the 

Tax but failed to pay the full amount due to 

Plaintiffs; and (5) Plaintiffs are entitled 

to a declaratory judgment that Defendants 

are agents for taxable establishments and 

“as such, are required to collect the 

County’s full tax from the consumers of the 

rooms.”

The referenced allegations were found in separate sections 

of the complaint including: in assertions of underlying fact; in 

a request for a declaratory judgment; in a claim for recovery 

based on a theory of agency; and in plaintiff Mecklenburg 

County’s prayer for relief. However, even reading these 

statements together, we cannot interpret them as providing 
-26-

notice of a cognizable claim. Plaintiffs attempt to seek

recovery for breach of contract based on a contractual 

obligation to collect the occupancy tax on the gross receipts

defendants derived from the rental of accommodations. On this 

record, we cannot find that plaintiffs’ contract theory has been 

sufficiently pled and therefore, find no error in the trial 

court’s ruling granting defendants’ motion to dismiss this 

claim. Though not specifically argued, plaintiffs reference 

statements in the complaints of Wake County, Buncombe County, 

and Dare County. A review of these complaints reveals a 

repetition of some portions of the allegations made in the 

Mecklenburg County complaint, but they are likewise insufficient 

to provide notice of a cognizable claim. Thus, we find 

insufficient notice of a contractual obligation claim as to the 

complaints of Buncombe, Dare, and Wake Counties.

Plaintiffs further contend that a claim raised during 

summary judgment may provide sufficient notice to the opposing 

party where the party asserting the claim did not earlier 

disavow it. In support of their contention, plaintiffs cite 

cases from the Sixth Circuit Federal Court interpreting Federal 

Rules of Civil Procedure: 

Where language in a complaint is ambiguous, 

the Sixth Circuit employs a “course of the 
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proceedings test” to determine whether 

defendants have received notice of the 

plaintiff's claims, analyzing the adequacy 

of notice on a case-by-case basis. Accord 

Moore v. City of Harriman, 272 F.3d 769, 

772, 774 (6th Cir.2001) (en banc) (plurality 

opinion) (“Subsequent filings in a case may 

rectify deficiencies in the initial 

pleadings.” (citations omitted)). A 

plaintiff may sufficiently notify a 

defendant of an argument by raising it in a 

response to summary judgment, provided that 

the party does not disavow its intent to use 

the argument earlier in the proceedings.

Copeland v. Regent Elec., Inc., 499 F. App'x 425, 435 (6th Cir. 

2012) (unpublished) (citations and quotations omitted).

Interpreting our Rules of Civil Procedure as to notice 

pleading, our Supreme Court has held that “notice pleading is 

made possible by the liberal opportunity for discovery and the 

other pretrial procedures established by the Rules to disclose 

more precisely the basis of both claim and defense and to define 

more narrowly the disputed facts and issues.” Pyco Supply Co., 

Inc., 321 N.C. at 442—43, 364 S.E.2d at 384. Plaintiffs raised

a claim for the first time in a motion for summary judgment and 

on appeal, provide no authority from our General Statutes or 

North Carolina jurisprudence to support their argument to do so. 

We affirm the trial court’s dismissal of plaintiff’s claim that 

defendants are contractually obligated to collect and remit the 

occupancy tax.
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III

Plaintiffs argue the trial court erred by dismissing their 

claim that defendants collected but failed to remit taxes 

charged on the sales price paid by consumers. Specifically, 

plaintiffs contend Judge Murphy impermissibly overruled the 

prior holding of another superior court judge, Judge Diaz. We 

disagree.

“Litigants and superior court judges must remain mindful 

that the power of one judge of the superior court is equal to 

and coordinate with that of another.” Adkins v. Stanly Cnty. 

Bd. of Educ., 203 N.C. App. 642, 651, 692 S.E.2d 470, 476 (2010)

(citation and quotations omitted).

The well established rule in North Carolina 

is that no appeal lies from one Superior 

Court judge to another; that one Superior 

Court judge may not correct another's errors 

of law; and that ordinarily one judge may 

not modify, overrule, or change the judgment 

of another Superior Court judge previously 

made in the same action.

Calloway v. Motor Co., 281 N.C. 496, 501, 189 S.E.2d 484, 488 

(1972) (citation omitted).

Here, Judge Diaz was presented with a challenge to 

plaintiffs’ claim for collected but not remitted taxes in the 

form of defendants’ Rule 12(b)(6) motion to dismiss. When the 

motion was denied, defendants subsequently challenged the same 
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claim in the form of a motion for summary judgment before Judge 

Murphy.

The test [for a] Rule 12(b)(6) [motion] 

is whether the pleading is legally 

sufficient. The test on a motion for 

summary judgment made under Rule 56 and 

supported by matters outside the pleadings 

is whether on the basis of the materials 

presented to the courts there is any genuine 

issue as to any material fact and whether 

the movant is entitled to judgment as a 

matter of law. Therefore, the denial of a 

motion to dismiss made under Rule 12(b)(6) 

does not prevent the court, whether in the 

person of the same or a different superior 

court judge, from thereafter allowing a 

subsequent motion for summary judgment made 

and supported as provided in Rule 56.

Barbour v. Little, 37 N.C. App. 686, 692, 247 S.E.2d 252, 256 

(1978). “[T]he Rule 12(b)(6) motion is addressed solely to the 

sufficiency of the complaint . . . .” Indus., Inc. v. Constr. 

Co., 42 N.C. App. 259, 263, 257 S.E.2d 50, 53 (1979) (citation 

omitted).

In his 19 November 2007 order addressing defendants’ motion 

to dismiss plaintiffs’ claim for failure to remit taxes, Judge 

Diaz gave the following summary as to plaintiffs’ allegations:

(71) The Complaints in these cases 

allege (either directly or by implication) 

that Defendants are in fact charging and 

collecting the Occupancy Tax from consumers, 

but not remitting to Plaintiffs the full 

amount collected. In fact, Plaintiffs 

allege Defendants are charging and 
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collecting the tax on the higher retail rate 

charged to consumers, but only remitting to 

Plaintiffs an amount of tax based on the 

lower wholesale rate paid to hotel owners, 

thereby pocketing the difference. Plaintiffs 

also allege Defendants are not filing 

occupancy returns, as required by law. . . . 

Based on these allegations, Judge Diaz concluded that 

“Defendants have not complied with the plain language of the 

Occupancy Tax (and the corresponding enabling acts) requiring 

them to account for and remit all such taxes.” Thus, “[a]t this 

stage . . . the Court need only look to Plaintiffs’ pleadings to 

conclude that dismissal of the principal claims is not 

appropriate.” Judge Diaz, therefore, denied defendants’ motion 

to dismiss pursuant to Rule 12(b)(6).

On 4 February 2011, Judge Murphy heard arguments from 

plaintiffs and defendants on cross motions for summary judgment. 

Based on their briefs and arguments before the trial court, 

Judge Murphy granted summary judgment in favor of defendants, 

dismissing plaintiffs’ claim for collected but not remitted 

taxes.

In his order, Judge Murphy discussed three cases presented 

by plaintiffs in support of their motion: “City of Rome v. 

Hotels.com, No.4:05-CV-249-HLM, 2006 U.S. Dist. LEXIS 56369 

(N.C. May 8, 2006)”; “Expedia, Inc. v. City of Columbus, 681 
-31-

S.E.2d 122 (Ga. Sup. Ct. 2009)”; and “City of Gallup v. 

Hotels.com, L.P., No.06-0549-JC, 2007 U.S. Dist. LEXIS 86720 

(January 30, 2007).” Each case dealt with similar questions of 

tax liability and OTCs in other jurisdictions. Judge Murphy 

observed that where an OTC had been held responsible for 

remitting a tax, the conclusion was predicated upon a statutory 

requirement or contractual provision imposing upon the OTC the 

responsibility for collecting the tax. By comparison, Judge 

Murphy noted that our North Carolina General Statutes did not 

impose the same duty upon defendants, and plaintiffs provided no 

authority supporting a recovery predicated on a theory of 

contractual undertaking. Accordingly, Judge Murphy concluded 

that “Plaintiffs’ [sic] have been unable to direct this Court to 

any binding legal precedent to support a ‘collected-but-notremitted’ theory of recovery” and on this basis, granted 

defendants’ motion to dismiss the claim.

Judge Diaz and Judge Murphy addressed motions in this case 

at different stages in the action and based on different rules. 

Judge Diaz concluded pursuant to Rule 12(b)(6) that the factual 

allegations in plaintiffs’ complaints were legally sufficient so 

as to not preclude their claims for recovery of taxes. See 

Barbour, 37 N.C. App. at 692, 247 S.E.2d at 256 (“The test [for
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a] Rule 12(b)(6) [motion] is whether the pleading is legally 

sufficient.”). Thereafter, Judge Murphy concluded pursuant to 

Rule 56 that as to the issue of whether defendants were subject 

to the Occupancy Tax, plaintiffs failed to provide any authority

that defendants had a legal duty to collect taxes. See N.C. Gen. 

Stat. ' 1-1A, Rule 56(c) (2013) (Summary judgment is appropriate 

“if the pleadings, depositions, answers to interrogatories, and 

admissions on file, together with the affidavits, if any, show 

that there is no genuine issue as to any material fact and that 

any party is entitled to a judgment as a matter of law.”). 

Based on our jurisprudence, Judge Murphy’s ruling pursuant to 

Rule 56 was proper. Therefore, plaintiffs’ argument is 

overruled.

IV

Lastly, plaintiffs argue that the trial court erred in 

dismissing their claims for accounting, conversion, and 

constructive trust. We disagree.

Again, “[w]e review a trial court's order granting summary 

judgment de novo . . . .” Stanly Cnty. Bd. of Educ., 203 N.C. 

App. at 644, 692 S.E.2d at 472 (citation omitted).

Accounting

In the complaints filed by Dare County, Mecklenburg County, 
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and Wake County, each county’s demand for an accounting was 

predicated upon the assertion that defendants were under a legal 

obligation based on their respective Occupancy Tax resolution or 

ordinance to collect and remit taxes to the County on the gross 

receipts derived by them as compensation or consideration for

renting rooms in the county. Buncombe County’s declaratory 

judgment action sought a ruling declaring “its affirmative 

rights to audit and collect occupancy tax obligations owed by 

these Defendants to [] Plaintiff.”

In Issue I, we held that the enabling legislation enacted

by our General Assembly as to Buncombe, Dare, Mecklenburg, and 

Wake counties allowing the counties to impose an occupancy tax 

by resolution did not encompass the transactions wherein 

consumers rented lodging accommodations through defendants’ 

websites. Therefore, as plaintiffs cannot establish that 

defendants were under a legal obligation based on their 

individual occupancy tax resolutions to collect and remit taxes 

to the respective county, plaintiffs cannot prevail on their 

demands for accounting. Accordingly, we overrule plaintiffs’ 

argument and affirm the trial court’s ruling dismissing 

plaintiffs’ demand for accounting.

Conversion
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First, we note that while claims of conversion were 

asserted in the complaints of Dare County, Mecklenburg County, 

and Wake County, the trial court addressed only Mecklenburg 

County’s conversion claim in the trial court’s summary judgment 

order.

On 19 November 2007, the trial court granted defendants’ 

12(b)(6) motion to dismiss the conversion claims brought by 

plaintiffs Buncombe County, Dare County, and Wake County. No 

appeal was taken by Buncombe County, Dare County, and Wake 

County from these dismissals.

On 14 January 2008, Mecklenburg County filed its complaint 

asserting a claim for conversion. In its complaint, Mecklenburg 

County alleged the following:

Defendants, upon information and belief, 

keep the difference between the amount of 

Tax charged to the public and the amount of 

Tax remitted to the hotel, motel, or inn, 

which then remits this lower tax amount to 

the County. At all times herein mentioned, 

Defendants wrongfully possessed and/or 

controlled the monies which constitute this 

difference between the amount of Tax charged 

to the public and the amount of Tax remitted 

to the County. Defendants have converted or 

taken these Tax monies for their own use and 

benefit, thereby permanently depriving the 

County of the use and benefit thereof.

Following the assignment of Mecklenburg County’s complaint to 

the business court and the consolidation of these actions, both 
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plaintiffs and defendants filed motions for summary judgment. 

The trial court addressed only Mecklenburg County’s claim for

conversion in its summary judgment order and dismissed the 

claim.

“In North Carolina, conversion is defined as an 

unauthorized assumption and exercise of the right of ownership 

over goods or personal chattels belonging to another, to the 

alteration of their condition or the exclusion of an owner's 

rights.” Myers v. Catoe Constr. Co., 80 N.C. App. 692, 695, 343 

S.E.2d 281, 283 (1986) (citation omitted). 

The general rule is that there is no 

conversion until some act is done which is a 

denial or violation of the plaintiff's 

dominion over or rights in the property. 

Therefore, two essential elements are 

necessary in a claim for conversion: (1) 

ownership in the plaintiff, and (2) a 

wrongful conversion by the defendant.

Bartlett Milling Co. v. Walnut Grove Auction & Realty Co., 192 

N.C. App. 74, 86, 665 S.E.2d 478, 489 (2008) (citation and 

quotations omitted). “[T]he general rule is that money may be 

the subject of an action for conversion only when it is capable 

of being identified and described.” Variety Wholesalers, Inc. v. 

Salem Logistics Traffic Servs., LLC, 365 N.C. 520, 528, 723 

S.E.2d 744, 750 (2012) (citation omitted).

The requirement that there be earmarked 
-36-

money or specific money capable of 

identification before there can be a 

conversion has been complicated as a result 

of the evolution of our economic system. 

Recognizing this reality, numerous courts 

around the country have adopted rules 

requiring the specific identification of a

sum of money, rather than identification of 

particular bills or coins.

Id. at 528—29, 723 S.E.2d at 750 (citations and quotations 

omitted). “In the context of this conversion claim, we conclude 

that funds transferred electronically may be sufficiently 

identified through evidence of the specific source, specific 

amount, and specific destination of the funds in question.” Id.

at 529, 723 S.E.2d at 750—51 (addressing a claim involving 

transfers of funds in specific dollar amounts totaling 

approximately $888,000.00).

Here, Mecklenburg County’s conversion claim is not one for 

a specific amount of taxes alleged due, much less particular 

bills and coins; rather, Mecklenburg County’s claim is for a 

category of monies allegedly owed, taxes. Even reading Variety 

Wholesalers, Inc., broadly to presume that in the context of any 

conversion claim where funds are transferred electronically the 

establishment of the funds’ specific source, specific amount, 

and specific destination is sufficient to connote 

identification, Mecklenburg County’s complaint fails to allege 
-37-

such requirements. See id.; see also State ex rel. Pilard v. 

Berninger, 154 N.C. App. 45, 57, 571 S.E.2d 836, 844 (2002)

(holding the evidence supported the conversion claim where the 

spouse of the decedent, acting as an administratix, failed to 

properly distribute the decedent’s share of three $75,000.00 

certificates of deposit as a portion of his estate). Therefore, 

we see no error in the trial court’s dismissal of Mecklenburg 

County’s conversion claim.

Constructive Trust

A constructive trust is a duty, or 

relationship, imposed by courts of equity to 

prevent the unjust enrichment of the holder 

of title to, or of an interest in, property 

which such holder acquired through fraud, 

breach of duty or some other circumstance 

making it inequitable for him to retain it 

against the claim of the beneficiary of the 

constructive trust.

Variety Wholesalers, Inc., 365 N.C. at 530, 723 S.E.2d at 751

(citation omitted).

Here, plaintiffs have been unable to establish any genuine 

issue of material fact as to whether defendants have retained 

monies collected from the rental of accommodations in the 

respective counties which were “acquired through fraud, breach 

of duty or some other circumstance making it inequitable for 

[defendants] to retain it[.]” Id. As such, summary judgment 
-38-

was appropriate. Accordingly, we affirm the trial court’s 

dismissal of plaintiffs’ claims seeking imposition of a 

constructive trust.

Affirmed.

Judges McGEE and STROUD concur.