The constructive trust, an equitable remedy designed to prevent unjust enrichment, is a vestige of a U.S. legal system that was originally comprised of separate courts of law and equity.
When Bankruptcy And Equity Collide
In <i>Ades and Berg Group Investors v. Breeden</i> (<i>In re Ades and Berg Group Investors</i>), the court of appeals affirmed a decision below refusing to impose a constructive trust on proceeds from a settlement of reinsurance claims that were paid to a Chapter 11 debtor. According to the Second Circuit, "retention by the bankruptcy estate of assets that, absent bankruptcy, would go to a particular creditor is not inherently unjust."
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