                   United States Court of Appeals
                         FOR THE EIGHTH CIRCUIT
                                 ___________

                                 No. 06-3280
                                 ___________

In re: Brook Valley VII, Joint Venture, *
                                        *
             Debtor,                    *
                                        *
Rick D. Lange,                          *
                                        *
             Appellee,                  *
                                        *
       v.                               *
                                        *
Robert C. Schropp; Leo E. Dahlke;       *
Phoenix Properties, LLC; Phoenix        *
Properties, of Brook Valley 1, LLC;     *
Phoenix Properties, of Brook Valley 2, *
LLC; R&L Valley Properties, LLC;        *   Appeal from the United States
RCS & Sons, Inc.,                       *   Bankruptcy Appellate Panel for the
                                        *   Eighth Circuit.
             Appellants,                *
                                        *
____________________                    *
                                        *
In re: Brook Valley IV, Joint Venture, *
                                        *
             Debtor,                    *
                                        *
Rick D. Lange,                          *
                                        *
             Appellee,                  *
                                        *
v.                                      *
                                        *
Robert C. Schropp; Leo E. Dahlke;       *
RCS & Sons, Inc.; Phoenix Properties,   *
LLC; Phoenix Properties, of Brook       *
Valley 1, LLC; Phoenix Properties, of   *
Brook Valley 2, LLC; R&L Valley         *
Properties, Properties, LLC,            *
                                        *
             Appellants,                *
                                        *
____________________                    *
                                        *
In re: Brook Valley VII, Joint Venture, *
                                        *
             Debtor,                    *
                                        *
Rick D. Lange,                          *
                                        *
             Appellee,                  *
                                        *
       v.                               *
                                        *
Robert C. Schropp; Leo E. Dahlke;       *
Phoenix Properties, LLC; Phoenix        *
Properties, of Brook Valley 1, LLC;     *
Phoenix Properties, of Brook Valley     *
2, LLC; R&L Valley Properties, LLC; *
RCS & Sons, Inc.,                       *
                                        *
             Appellants,                *
                                        *
____________________                    *
                                        *
In re: Brook Valley IV, Joint Venture, *
                                        *
             Debtor,                    *
                                        *

Rick D. Lange,                          *


                                        -2-
                                      *
             Appellee,                *
                                      *
             v.                       *
                                      *
Robert C. Schropp; Leo E. Dahlke;     *
RCS & Sons, Inc.; Phoenix Properties, *
LLC; Phoenix Properties, of Brook     *
Valley 1, LLC; Phoenix Properties, of *
Brook Valley 2, LLC; R&L Valley       *
Properties, LLC,                      *
                                      *
             Appellants.              *

                                   ___________

                             Submitted: March 14, 2007
                                Filed: August 6, 2007
                                 ___________

Before COLLOTON, HANSEN, and GRUENDER, Circuit Judges.
                          ___________

COLLOTON, Circuit Judge.

       Rick D. Lange, the bankruptcy trustee for debtors Brook Valley IV, Joint
Venture, and Brook Valley VII, Joint Venture, brought suit against Robert C.
Schropp, Leo E. Dahlke, and several entities controlled by Schropp and/or Dahlke.
Lange alleges that Schropp and Dahlke breached their fiduciary duties to the
bankruptcy estates and converted property of the estates. After a two-day trial, the
bankruptcy court concluded that Schropp and Dahlke had violated their fiduciary
duties. To remedy this breach, the court imposed a constructive trust on their gains
from the sale of the properties and awarded damages. Both sides appealed to the
Eighth Circuit Bankruptcy Appellate Panel (BAP), which affirmed the bankruptcy
court’s finding that Schropp and Dahlke had breached their fiduciary duties. Lange

                                        -3-
v. Schropp (In re Brook Valley IV), 347 B.R. 662 (8th Cir. BAP 2006). As to the
remedy, the BAP approved the bankruptcy court’s imposition of a constructive trust,
and directed the award of additional damages beyond those granted by the bankruptcy
court. We affirm the ruling of the BAP.

                                          I.

       Schropp and Dahlke were partners in thirteen commercial real estate
partnerships with Prime Realty, an entity controlled by James McCart. The debtors,
Brook Valley IV and Brook Valley VII, were two of these partnerships, with each
owning a single commercial property in Omaha. In September 2001, a dispute arose
between the partners in the Brook Valley joint ventures. In response to this falling
out, McCart’s company (Prime Realty) filed suit to dissolve all thirteen partnerships,
including the two at issue in this appeal. By March 2002, several lenders had
foreclosed on the partnerships’ properties, causing Schropp, Dahlke, and Prime Realty
to lose substantial sums of money. As a result, Prime Realty filed for bankruptcy
protection in March 2002.

       The Brook Valley partnerships suffered a similar fate. When the initial
construction loans came due, the primary lender, First National Bank of Omaha,
refused to extend the repayment term, forcing the Brook Valley partnerships to file for
bankruptcy on April 2, 2002. In addition to the mortgage with First National, the
properties were allegedly encumbered by liens held by Darland Construction
Company and Prime Realty, though there was some dispute as to the validity of these
liens. After filing for bankruptcy, both partnerships acted as debtors in possession
under the exclusive control of Schropp and Dahlke.

       Seventeen days after filing for bankruptcy protection, Schropp and Dahlke,
acting on behalf of the bankruptcy estates, consented to a foreclosure sale of the two
Brook Valley properties. Prime Realty, the entity controlled by McCart and a partner

                                         -4-
in both ventures, objected to the sale, arguing that it did not serve the interests of the
bankruptcy estates. McCart argued that the properties had substantial equity and
produced sufficient rents to service the debt to First National. Concerned that Schropp
and Dahlke were unwilling to act in the estates’ interests, Prime Realty requested the
appointment of a trustee. After the bankruptcy court denied this request, McCart
remained convinced that the properties were more valuable than Schropp and Dahlke
had acknowledged, and he attempted to buy the properties at the foreclosure sale.
Because of Prime Realty’s precarious financial position, McCart could not raise the
necessary capital.

       The foreclosure sale occurred on September 24, 2002. The winning bidder, at
a combined cost of $2,406,430 for both properties, was Phoenix Properties LLC, an
entity controlled by Schropp and Dahlke. Schropp and Dahlke did not disclose their
controlling interest in Phoenix Properties. At the time of the sale, both Great Western
Bank and First National conducted appraisals of the properties. Great Western
appraised the properties at $3,310,105, while First National valued them between
$2,480,000 and $3,700,000. These appraisals suggest that Phoenix purchased the
properties at a considerable discount. Thus, the decision to consent to the foreclosure
sale had proved lucrative for Schropp and Dahlke, if not for the bankruptcy estates
and the creditors.

       Schropp and Dahlke financed most of the acquisition with a loan from Great
Western Bank, while an entity called Phoenix Brook Valley Re-Cap provided an
additional $600,000. The terms of the foreclosure sale required all bidders other than
First National to pay in cash the amount of the estates’ debt to First National. Any
amount beyond this would be paid to the bankruptcy court pending a determination
of the priority of the remaining liens. Phoenix Properties failed to abide by this
stricture, purporting to “credit bid” the amount of the Darland lien, rather than pay this
amount to the bankruptcy court, as required by the terms of the sale.



                                           -5-
       Shortly after the foreclosure sale, in November 2002, McCart discovered that
Schropp and Dahlke had been on both sides of the foreclosure sale as controlling
partners of both Phoenix Properties and the Brook Valley partnerships. Upon learning
this fact, Prime Realty filed another motion requesting the appointment of a trustee,
and accused Schropp and Dahlke of secretly buying estate property. Schropp and
Dahlke responded by denying this accusation:

      Great Western Bank entered into a transaction with Phoenix Properties,
      LLC. Phoenix Properties, LLC also apparently entered into a transaction
      with Phoenix Brook Valley Re-Cap, LLC. The purpose of both
      transactions was apparently to provide financing to Phoenix Properties
      to allow it to bid at the trust deed foreclosure sale conducted by the First
      National Bank of Omaha. Both of these transactions and the supporting
      documents were entered into between parties who are not parties to this
      bankruptcy proceeding. Those private transactions which apparently
      provided the financial resources for Phoenix Properties, LLC to bid on
      and buy the real estate being sold at public auction have nothing to do
      with this bankruptcy case.

(Appellee’s App. 109, 118).

      This response, of course, did not acknowledge that Schropp and Dahlke had
controlling interests in both the debtors in possession and Phoenix Properties. The
bankruptcy court found it “misleading,” (Add. at A32), and concluded that “Mr.
Schropp and Mr. Dahlke, through their counsel, who were also counsel for the
debtors, went to a lot of trouble to keep the ownership of Phoenix Properties a secret
from the court and from counsel for Prime Realty.” (Id. at A33).

       On June 10, 2004, all of the debtors’ assets having been sold, the bankruptcy
court converted the case to a Chapter 7 proceeding and appointed the Appellee, Rick
Lange, as trustee of both estates. This order mooted Prime Realty’s motion for
appointment of a trustee. Lange investigated Prime Realty’s accusations and then

                                          -6-
commenced this suit against Schropp, Dahlke, and several entities they controlled.
The parties to this suit agreed that the Brook Valley properties should be sold, with
the net proceeds to be held by the court. After paying off debt, the sales generated a
net profit of $865,938.95 on the two properties.

       After a two-day trial, the bankruptcy court found in the trustee’s favor and
imposed a constructive trust on the net proceeds of the sale. In addition, the court
found that $146,862.35, which Schropp and Dahlke “credit bid” at the foreclosure sale
but never paid, was property of the bankruptcy estates and had been converted by
Schropp and Dahlke. The bankruptcy court also found that the net cash flow earned
by the partnerships in the period between the filing for bankruptcy and the foreclosure
sale ($86,581.32, plus interest) was property of the estate, and the court awarded that
amount to the trustee. The court nonetheless concluded that the last two amounts
would not be due if Schropp and Dahlke complied with the order establishing a
constructive trust. The court also declined to award damages for operating profits
generated by the properties after the sale to Phoenix Properties.

      Both sides appealed the bankruptcy court’s judgment to the BAP, which
affirmed the bankruptcy court in most respects, but found the trustee entitled to all of
the damages, without regard to whether Schropp and Dahlke complied with the court’s
constructive trust order. Brook Valley, 347 B.R. at 677-78. The BAP also awarded
damages based on the profits that Schropp and Dahlke earned from operating the
properties after the foreclosure sale. Id. at 678. Like the BAP, we review the
bankruptcy court’s legal conclusions de novo and its findings of fact for clear error.
Debold v. Case, 452 F.3d 756, 761 (8th Cir. 2006).

                                          II.

     Schropp and Dahlke argue that the trustee’s action against them is an
impermissible collateral attack on the bankruptcy court’s order allowing the debtors

                                          -7-
to proceed with the foreclosure sale. In their view, property interests acquired at a
foreclosure sale are “good against the world” and thus are not subject to later attack
by the trustee.

       Once a sale of assets has been approved by a final order of the bankruptcy
court, it is “a judgment that is good as against the world, not merely as against parties
to the proceeding.” Regions Bank v. J.R. Oil Co., LLC, 387 F.3d 721, 732 (8th Cir.
2004). Under this standard, property rights acquired at a foreclosure sale cannot be
challenged unless the procedural rules allow for a collateral attack. See Fed. R. Civ.
P. 60(b); Fed. R. Bankr. P. 9024. Thus, if the trustee discovers that the order
permitting a foreclosure sale has been obtained wrongfully, Rule 60(b) governs his
ability to obtain relief from the otherwise final judgment.

       We conclude, however, that Rule 60(b) does not apply in this circumstance.
This action does not directly attack the validity of the foreclosure sale. Instead, the
trustee alleges a breach of fiduciary duty and requests that the gains enjoyed by
Schropp and Dahlke be placed in a constructive trust, to be conveyed to the estates.
The court need not set aside the judgment approving the foreclosure sale to effect a
disgorgement of these allegedly ill-gotten gains. Thus, the trustee’s action is not an
impermissible collateral attack on a final sale, because he does not seek to abrogate
the foreclosure sale. Rather, he seeks a remedy for an alleged breach of fiduciary
duty, where the remedy presumes the continued validity of the foreclosure sale itself.

       Schropp and Dahlke contend that the properties no longer belonged to the
bankruptcy estates at the time of the foreclosure sale, so that bidding at the foreclosure
sale could not constitute a breach of fiduciary duty. The trustee maintains that an
order permitting a foreclosure sale does not release the property from the estate, and
that because the debtors did not “abandon” the properties, the properties remained part
of the estates until the sale was consummated. 11 U.S.C. § 554(d) (“Unless the court



                                           -8-
orders otherwise, property of the estate that is not abandoned under this section and
that is not administered in the case remains property of the estate.”).

        When a bankruptcy court lifts the automatic stay, it merely removes an
injunction barring creditors from bringing suit against the debtor. Catalano v.
Commissioner, 279 F.3d 682, 686 (9th Cir. 2002). “Although the property may pass
from the control of the estate, that does not mean that the estate’s interest in the
property is extinguished.” Id. “Relief from an automatic stay entitles the creditor to
realize its security interest . . . in the property, but all proceeds in excess of the
creditor’s interest must be returned to the trustee.” Nebel v. Richardson (In re Nebel),
175 B.R. 306, 312 (Bankr. D. Neb. 1994). Because the estate is entitled to any
proceeds in excess of the amount owed, id., the estate retains a property interest so
long as state law recognizes the underlying property right. Therefore, an order lifting
the automatic stay, on its own, does not remove the property from the bankruptcy
estate.

       Notwithstanding this interpretation of federal law, Schropp and Dahlke argue
that the foreclosure sale extinguished the estates’ interest in the property under state
law, which determines the nature and extent of any property interest. See N.S. Garrott
& Sons v. Union Planters Nat’l Bank of Memphis (In re N.S. Garrott & Sons), 772
F.2d 462, 466 (8th Cir. 1985). If lifting the automatic stay had extinguished the
underlying property interests, it is immaterial that any remaining interests would be
part of the estates. Schropp and Dahlke point out that Nebraska law does not provide
a debtor the right to cure where notice of default is given and the one-month cure
period has expired. Neb. Rev. Stat. § 76-1012. Nor does Nebraska law give a
mortgagor a right to redeem property after the foreclosure sale has occurred. Neb.
Rev. Stat. § 76-1010(2). Schropp and Dahlke infer from these provisions that a
bankruptcy estate has no remaining property interest once a bankruptcy court has
ordered a foreclosure sale.



                                          -9-
       We disagree. Prior to the foreclosure sale, the mortgagor retains the right to pay
the note in full and retake the property. Because the Brook Valley partnerships
retained this right, their interests in the properties were not extinguished until the
foreclosure sales occurred. See Butts v. Hale, 59 N.W.2d 583, 586-87 (Neb. 1953);
In re Jones, 214 B.R. 492, 493 (Bankr. D. Neb. 1997). Thus, because the properties
were part of the estates at the time of the foreclosure sale, we must decide whether
Schropp and Dahlke acted improperly by bidding. The bankruptcy court held that
there is a per se prohibition on debtors in possession purchasing estate property at a
foreclosure sale. See also In re Rahe, 178 B.R. 801, 802 (Bankr. D. Neb. 1995). On
appeal, the BAP ruled that while there was no per se prohibition, Schropp and Dahlke
violated their fiduciary duties in this case by consenting to the foreclosure sale and
then bidding. In this appeal, Schropp and Dahlke argue that there is no blanket
prohibition on such bidding, and that they did not act improperly by bidding at the
foreclosure sale.

       Debtors in possession and those who control them owe fiduciary duties to the
bankruptcy estate. CFTC v. Weintraub, 471 U.S. 343, 355 (1985); Wolf v. Weinstein,
372 U.S. 633, 649-50 (1963). Thus, the partners in a bankrupt partnership, acting as
a debtor in possession, must run the business as agents of the bankruptcy estate, and
not for their own personal gain. The fiduciary obligation consists of two duties: the
duty of care and the duty of loyalty. 7 Collier on Bankruptcy ¶ 1107.02[4] (15th ed.
rev. 2006). The duty of care requires the fiduciary to make good-faith decisions that
can be attributed to a rational business purpose. In re Integrated Res., Inc., 147 B.R.
650, 656 (S.D.N.Y. 1992). In general, courts do not second-guess business decisions
made in good faith. Id.

       The duty of loyalty comes into play when there appears to be a conflict between
the interests of the fiduciary and the entity to which he owes loyalty. For a debtor in
possession, this duty “includes an obligation to refrain from self-dealing, to avoid
conflicts of interests and the appearance of impropriety, to treat all parties to the case

                                          -10-
fairly and to maximize the value of the estate.” 7 Collier on Bankruptcy ¶ 1107.02[4].
“Courts have held that managers of debtors in possession breached their duty of
loyalty by . . . participating as an undisclosed bidder at an auction of estate property.”
Id.; see Ross v. Kirschenbaum (In re Beck Indus., Inc.), 605 F.2d 624, 636 (2d Cir.
1979).

       Though some courts – including the bankruptcy court in this case – have held
that bidding for estate property always violates the debtor in possession’s duty of
loyalty, see Rahe, 178 B.R. at 802, we need not adopt this blanket rule to conclude
that Schropp and Dahlke violated their duties here. Only seventeen days after filing
the bankruptcy petitions, Schropp and Dahlke consented to relief from the automatic
stay. This consent implicitly represented to the court that Schropp and Dahlke
believed foreclosure to be in the estates’ interests. This could be the case only if the
properties could not be operated profitably on the estates’ behalf. In fact, the
properties remained profitable after the partnerships filed for bankruptcy, and the
appraisals of the property revealed substantial equity. Schropp and Dahlke proceeded
to bid secretly at the foreclosure sale and take possession of the properties
unencumbered by any duties to the bankruptcy estates. Rather than searching for
financing to make their own purchase of the properties, Schropp and Dahlke “should
have been making efforts to obtain financing on behalf of the Debtors to salvage the
properties.” Brook Valley, 347 B.R. at 674 (emphasis in original).

       When a transaction involving an insider is challenged as breaching the insider’s
duty of loyalty, the fiduciary must prove that the transaction was fair and reasonable.
Norlin Corp. v. Rooney, Pace, Inc., 744 F.2d 255, 265 (2d Cir. 1984). Schropp and
Dahlke have failed to carry this burden. Initially, they caused the debtors to consent
to relief from the automatic stay. Then, they secretly bid at the foreclosure sale,
paying considerably less than the appraised value of the properties. After Prime
Realty objected, Schropp and Dahlke misled the court about their holdings in Phoenix



                                          -11-
Properties. The actions of Schropp and Dahlke support the BAP’s conclusion that
they were looking out for themselves rather than the estates.

                                           III.

                                            A.

       Having concluded that Schropp and Dahlke violated their fiduciary duties to the
estates, we turn to the issue of whether the bankruptcy court properly imposed a
constructive trust on their gains from the sale of the two properties. Schropp and
Dahlke argue that the price received at the foreclosure sale conclusively establishes
the value of the properties at the time of the sale. Using this measure, any recovery
by the trustee would be an undeserved windfall.

       “A constructive trust is a relationship, with respect to property, subjecting the
person who holds title to the property to an equitable duty to convey it to another on
the ground that his acquisition or retention of the property would constitute unjust
enrichment.” Knoell v. Huff, 395 N.W.2d 749, 755 (Neb. 1986). Courts impose a
constructive trust when one party has acquired property “under such circumstances
that he or she may not in good conscience retain the beneficial interest in the property.
In such a situation, equity converts the legal titleholder into a trustee holding the title
for the benefit of those entitled to the ownership thereof.” Gottsch v. Bank of
Stapleton, 458 N.W.2d 443, 450 (Neb. 1990) (internal quotation omitted). In general,
courts will not impose a constructive trust unless the title-holder obtained title by
“fraud, misrepresentation, or an abuse of an influential or confidential relationship.”
Balfany v. Balfany, 476 N.W.2d 681, 684 (Neb. 1991) (internal quotation omitted).



      In this case, Schropp and Dahlke used their position as insiders of the debtors
in possession to urge a foreclosure sale and then secretly bid for the properties.

                                           -12-
Because the properties turned out to be more valuable than the price paid at the
foreclosure sale, this transaction proved to be profitable to Schropp and Dahlke.
Schropp and Dahlke obtained these profits by abusing their position as debtors in
possession, and any profits stemming from these transactions should thus benefit the
estates, not Schropp and Dahlke. Thus, the bankruptcy court properly imposed a
constructive trust on the profits earned by Schropp and Dahlke from the sale of the
properties.

       Schropp and Dahlke urge that the proper remedy should be measured
differently. They argue that the commercial real estate market improved in the three
years that Phoenix Properties held title, and that the gain from this uptick in the
market should benefit them and not the estates. In their view, the court should
calculate damages based on the amount by which Phoenix Properties underpaid at the
foreclosure sale. And they argue that the price paid at the foreclosure sale
conclusively establishes the fair market value of the properties at that time. See BFP
v. Resolution Trust Corp., 511 U.S. 531, 545 (1994) (“We deem, as the law has
always deemed, that a fair and proper price, or a ‘reasonably equivalent value,’ for
foreclosed property, is the price in fact received at the foreclosure sale, so long as all
the requirements of the State’s foreclosure law have been complied with.”).

       We agree with the BAP that this argument “ignores the nature of the Trustee’s
action” against Schropp and Dahlke. Brook Valley, 347 B.R. at 677. “The foreclosure
sale was not inevitable; indeed, Chapter 11 is there to allow companies whose assets
have equity to attempt to preserve such equity for the benefit of their creditors.” Id.
Rather than consenting to the foreclosure sale and then purchasing the property
through another entity, Schropp and Dahlke could have continued to operate the
buildings to preserve equity for the bankruptcy estates and creditors. McCart had
alleged that the properties generated sufficient income and had sufficient equity to pay
off the partnerships’ debts. Similarly, the decision to re-purchase the properties



                                          -13-
confirms that Schropp and Dahlke recognized that continuing to operate the properties
would be profitable.

        Had Schropp and Dahlke chosen to maximize the value of the estates, as the law
required of them, they would have preserved the properties’ equity for the bankruptcy
estates, and the estates would have enjoyed any appreciation. As noted, a constructive
trust is a remedy for unjust enrichment. Knoell, 395 N.W.2d at 755. Schropp and
Dahlke seem to suggest that the proper remedy would allow them to retain profits they
earned by abusing their position as insiders. We conclude that a constructive trust
properly forces Schropp and Dahlke to disgorge their gains from the sale of these
properties.

                                         B.

       The bankruptcy court also ordered Schropp and Dahlke to refund to the trustee
the pre-foreclosure cash flow from the two Brook Valley properties ($86,581.32) and
the amount that was “credit bid” at the foreclosure sale but never paid by Schropp and
Dahlke ($146,862.35). Despite finding them liable for these funds, the bankruptcy
court concluded that Schropp and Dahlke could satisfy this obligation by complying
with the court’s imposition of a constructive trust on the proceeds of the sale. The
BAP concluded that the bankruptcy court had abused its discretion by allowing
Schropp and Dahlke to avoid refunding this money to the estates. We review the
bankruptcy court’s award of damages for abuse of discretion. Marvin Lumber and
Cedar Co. v. PPG Indus., Inc., 401 F.3d 901, 917 (8th Cir. 2005).

      Schropp and Dahlke argue that the BAP usurped the bankruptcy court’s role
when it modified the judgment to require payment of these damages regardless of
whether Schropp and Dahlke complied with the court’s constructive trust order. Our
review persuades us, however, that the BAP was correct. The bankruptcy court
offered no reason for its decision not to require the payment of these funds. In fact,

                                        -14-
it concluded that the pre-foreclosure cash flow from the properties was “property of
the bankruptcy estates” and directed that it “shall be paid to the trustee.” Similarly,
the bankruptcy court concluded that the use of the $146,862.35 by Schropp and
Dahlke “was a conversion of property of the bankruptcy estates” and that Schropp and
Dahlke had no right to distribute those funds without the court’s consent. The court
did not indicate that recovery of these funds would be duplicative, and the court’s
findings of fact make clear that Schropp and Dahlke owed these funds to the trustee.
We see no reason for Schropp and Dahlke to retain these funds when the bankruptcy
court correctly concluded that they were owed to the trustee.

                                            C.

       The bankruptcy court refused to award the trustee the net cash flow from the
three years that Phoenix owned and operated the properties. The court found that
these profits “appear on paper to be positive and in a significant amount,” but declined
to award damages because there was no evidence that Phoenix Properties had
distributed these profits to its partners, or that there was any excess cash. In short, the
money seemed to have disappeared. The bankruptcy court appeared to defer to
testimony that “the cash may have been reinvested in tenant improvements and, if so,
would be included in the proceeds of sale which are being held by the clerk.” (Add.
at A35) (emphasis added). The BAP reversed, concluding that the bankruptcy court’s
finding was clearly erroneous. Because the properties’ cash flow statements included
operating expenses, the BAP reasoned that the net cash flow figure already took
account of the cost of any tenant improvements. “If Schropp and Dahlke had evidence
of other expenses, or other uses of the resulting funds, the burden was on them to offer
such evidence and to account for the use of such funds.” Brook Valley, 347 B.R. at
678. The BAP concluded that they had failed to meet this burden.

      Schropp and Dahlke argue that the BAP erred by imposing a constructive trust
on these funds, and improperly engaged in appellate fact-finding. We disagree. The

                                           -15-
BAP did not impose a constructive trust on these funds; it merely directed an award
of damages. See Brook Valley, 347 B.R. at 678 (“The bankruptcy court declined to
award such damages . . . . We find that conclusion to be clearly erroneous.”).

      As for the amount of damages, the basis for the bankruptcy court’s refusal to
make this award is unclear, because the court did not explicitly find as a fact that
Schropp and Dahlke reinvested the disputed funds into tenant improvements. The
bankruptcy court merely stated that “there was testimony that the cash may have been
reinvested in tenant improvements.” In fact, there was little such testimony – only the
statement by an acquaintance of Schropp and Dahlke that they were constantly
reinvesting capital in the properties. The witness provided no reason why these
expenditures would not appear in the partnerships’ net cash flow figures. Citing this
testimony, the bankruptcy court declined to find that the money actually had been
reinvested in the properties.

       Because any tenant improvements should have been included in the net cash
flow computation, we conclude that a finding that the vanished cash had been invested
in the properties would be clearly erroneous on this record. There was simply no
evidentiary basis for the bankruptcy court to conclude that Schropp and Dahlke
reinvested revenue into tenant improvements beyond that reflected in the cash flow
figures. Those figures reflected all the money left over after the payment of operating
expenses. Because there is no basis for finding that this money was actually
reinvested in tenant improvements, we conclude that the bankruptcy court clearly
erred in refusing to award these damages to the trustee.

                                   *      *       *

      For the foregoing reasons, the ruling of the BAP is affirmed.
                      ______________________________



                                         -16-
