The Trouble with Constructive Trusts

The equitable remedy of constructive trust is employed when "property has been acquired in such circumstances that the holder of the legal title may not in good conscience retain the beneficial interest," and therefore equity converts him into a trustee. <i>In re Koreag, Controle et Revision S.A.</i>, 961 F.2d 341, 353 (2d Cir. 1992). This legal theory arises in bankruptcy cases when a non-debtor party with a pre-petition contract, which ostensibly grants such party an ownership interest in funds or which establishes an agency relationship with a debtor, seeks, in the bankruptcy case, to assert its ownership rights to the funds held by the debtor.

19 minute readNovember 29, 2004 at 01:08 PM
By
Harold D. Jones
Adam P. Wofse
The Trouble with Constructive Trusts

The equitable remedy of constructive trust is employed when “property has been acquired in such circumstances that the holder of the legal title may not in good conscience retain the

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