The question for decision is whether the petitioners, testamentary trustees, who have paid a tax on the income of the trust estate, which should have been paid by the beneficiary, are entitled to recover the tax, although the government's claim against the beneficiary has been barred by the statute of limitations. The present suit to recover the tax, brought by petitioners against respondent, the Collector, in the District Court for Massachusetts, resulted in a judgment for petitioners, 8 F.Supp. 354, which was reversed by the Circuit Court of Appeals for the First Circuit, 78 F.(2d) 136. We granted certiorari, 300 U.S. 643, 57 S.Ct. 610, 81 L.Ed. --, because of the conflict of the decision below with that of the Circuit Court of Appeals for the Third Circuit, United States v. Arnold, 89 F.(2d) 246.
Testator, by his will, left property in trust, to pay over the net income to his wife as sole beneficiary, at such times and in such amounts as she should deem best, during her natural life. She elected to take the bequest under the will in lieu of her dower or statutory interest. At that time several circuit courts of appeals had held that in these circumstances, the income payments to the widow are annuities purchased by surrender of the dower interest and not taxable as income to her, until they equal the value of the dower interest. Warner v. Walsh (D.C.) 15 F.(2d) 367; United States v. Bolster (C.C.A.) 26 F. (2d) 760, 59 A.L.R. 491; Allen v. Brandeis (C.C.A.) 29 F.(2d) 363. In conformity to the ruling of these decisions, the beneficiary did not include, in her 1928 tax return, any portion of the income received by her from the trust. A deficiency against the trustees was assessed by the Commissioner before, and was paid by them, under protest, from income of the trust, after collection from the beneficiary had been barred by the statute of limitations. After the statute had run, this Court held in Helvering v. Butterworth, 290 U.S. 365, 54 S.Ct. 221, 78 L.Ed. 365 (interpreting section 219, Revenue Act of 1924, c. 234, 43 Stat. 253, 275, corresponding to sections 161, 162 of the Revenue Act of 1928, c. 852, 45 Stat. 791, 838 (26 U.S.C.A. §§ 161, 162, and notes), under which the present tax was assessed), that the income was taxable to the beneficiary and not to the trustees.
In the present suit, brought by the trustees to recover the tax as erroneously collected, the Collector interposed the defense, sustained by the court below, that the tax which should have been paid by the beneficiary exceeded that paid by petitioners, and that, as any recovery would inure to the advantage of the beneficiary, the defendant could set off the tax debt due from her. One judge concurred, denying the right of set off in view of the bar of the statute, but holding the petitioners not entitled, in equity and good conscience, to recover.
The action, brought to recover a tax erroneously paid, although an action at law, is equitable in its function. It is the lineal successor of the common count in indebitatus assumpsit for money had and received. Originally an action for the recovery of debt, favored because more convenient and flexible than the common law action of debt, it has been gradually expanded as a medium for recovery upon every form of quasi-contractual obligation in which the duty to pay money is imposed by law, independently of contract, express or implied in fact. Ames, The History of Assumpsit, 2 Harv.L.Rev. 53; Woodward, Law of Quasi-Contracts, § 2.