Court Opinion

ID: 6912454
Source: CourtListenerOpinion
Date Created: 2022-07-23 22:28:20.496117+00
Date Added: 2024-06-11T16:06:33.232625
License: Public Domain

POPE, Circuit Judge
(dissenting).
When the Commissioner wrote the letter, Exhibit J, enclosing the “Consent to Credit” set out in the court’s opinion, he must have considered that he was proposing something which the addressee, the trustee, had a lawful right to do, namely, to apply the sums refunded to the trust, upon his own obligation on the deficiency assessed against him as grantor. I cannot think the Commissioner was in this suggesting a breach of trust by Easley. He must have thought, as do I, that it was perfectly proper for Easley to make this application.1
And if it was appropriate thus to apply the principal of these refunds to Eas-ley’s personal tax liability, it was likewise proper for him to make a similar application of the checks for interest on these refunded amounts. This he did, as the opinion shows, by endorsing the checks and applying them, as far as they would go on his own interest obligation. It is impossible, logically or as a matter of law, to distinguish this right to apply the payments of principal, as the Commissioner suggested, from the right to apply the interest in like manner.
The right so to do stems from the fact that it is apparent that it was never Easley’s intent, or the intent of anyone, to distribute to the trusts sums free from tax. The amounts paid as tax by the trusts, and later refunded, thus first came into the hands of the trusts solely as the unintended result of a mistake, and these refunded amounts were therefore owing, ex aequo et bono, to Easley, because of the trusts’ unjust enrichment. Cf. Restatement, Restitution, §§ 1, 49.2
It follows that since the trusts were under obligation to reimburse Easley, sums upon which the interest was cal*816culated were in substance Easley’s property, and the interest belonged to him. In receiving the interest, and applying it to the credit of him to whom it belonged, the trusts were mere conduits, and the interest was not income to them. I would reverse the tax court decision.

. Parker v. Westover, 9 Cir., 221 F.2d 603, 606, describes an instance in which a California Superior Court, sitting in Xirobate, appears to have approved a similar application of guardianship funds.

. “§ 1. Unjust Enrichment. A person who has been unjustly enriched at the expense of another is required to make restitution to the other.”
“§ 49. (1) A person is entitled to restitution from another to whom gratuitously and induced thereto by a mistake of law he has given land or other things or has surrendered a claim if the mistake
“(a) was caused by fraud or material misrepresentation, or
“(b) was as to the identity or relationship of the donee or was some other basic mistake, or
“(c) caused the donor to give other or more than he intended to give.
“(2) In the absenee of fraud, a donor who has made a basic mistake as to the a mount of a gift is entitled to restitution of the surplus only.”
California cases denying relief in cases of mistake of law are inapposite, for here the transaction is a gratuitous one.