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While Connecticut law recognizes the equitable remedy of the constructive trust that remedy is not invoked lightly. Its basis must be fraud, actual or constructive. Connecticut courts will find constructive fraud only when specific conditions are met. Apart from such situations, the basis of such trusts may be found in fraud, misrepresentation, imposition, circumvention, artifice, or concealment, or abuse of confidential relations.
The debtor was a bankrupt retail carpet dealer with stores in Massachusetts and Connecticut. After adjudication of bankruptcy, 45 customers who had given cash deposits for undelivered carpets filed a petition to have a constructive trust or lien imposed upon the deposits.
Under the circumstances, should the court grant the customers' motion to impose a constructive trust upon the deposits?
The court denied the request because it was without power to provide a remedy and there was no requirement that the debtor segregate the deposits it had received from the customers as prepaying buyers. As a result, the customers' deposits were no longer traceable.