- 14 -
The statutory bar to the right of action for the
collection of the tax does not prevent reliance upon a
defense which is not a set-off or a counterclaim, but
is an equitable reason, growing out of the
circumstances of the erroneous payment, why petitioners
ought not to recover.
Here the defense is not a counter demand on
petitioners, but a denial of their equitable right to
undo a payment which, though effected by an erroneous
procedure, has resulted in no unjust enrichment to the
government, and in no injury to petitioners or their
beneficiary. The government, by retaining the tax paid
by the trustees, is not reviving a stale claim. Its
defense, which inheres in the cause of action, is
comparable to an equitable recoupment or diminution of
petitioners' right to recover. "Such a defense is
never barred by the statute of limitations so long as
the main action itself is timely." Bull v. United
States, 295 U.S. 247, 262 * * * [Id. at 538-539.]
Even though the uncollected tax from the time-barred year
exceeded the tax in the main action before the Court, the
Government did not affirmatively recover the excess. To have
done so would have allowed equitable recoupment to be used for
more than defensive purposes.
In Rothensies v. Electric Storage Battery Co., 329 U.S. 296,
301-303 (1946), the Supreme Court indicated that it was unwilling
to expand the doctrine of equitable recoupment beyond its
established parameters, because to have done so would have
infringed upon the statute of limitations.14 Petitioner's
14In Rothensies v. Electric Storage Battery Co., 329 U.S.
296, 301 (1946), the Supreme Court stressed the importance of a
statute of limitations, stating:
(continued...)
Page: Previous 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 NextLast modified: May 25, 2011