Law Commons^™

Unjust Enrichment And Creditors, Emily Sherwin

Cornell Law Faculty Publications

The constructive trust remedy plays an important role in bankruptcy because it places restitution claimants in a position of priority over creditors. According to traditional rules governing constructive trusts, restitution claimants who can identify particular assets in the debtor's hands as products of an unjust enrichment recover in full, to the exclusion of other unsecured creditors. The draft Restatement (Third) of Restitution and Unjust Enrichment endorses this outcome with only minor qualifications.

The supposed basis for a constructive trust is unjust enrichment: courts grant the remedy to prevent the defendant from profiting at the claimant's expense. In bankruptcy, the parties …