OPINION
A INTRODUCTION
Presently before this court in the voluntary Chapter 11 bankruptcy case of UNION MEETING PARTNERS (“the Debtor”), a partnership which owns certain realty, is the Debtor’s request that we confirm its Fourth Amended Plan of Reorganization (“the Plan”) over the objection of the Debtor’s first mortgagee, Lincoln National Life Insurance Company (“Lincoln”). In conjunction therewith, we are asked to decide a volley of motions filed in anticipation of and response to either the Plan itself, plan voting, or plan confirmation, including: (1) Lincoln’s Motion for Valuation of Secured Claim (“the Valuation Motion”); (2) the Debtor’s Motion Pursuant to 11 U.S.C. § 1126(e) to Designate Ballot Submitted by Lincoln in Class 3 and to Fix the Amount of Lincoln’s Claim for Voting Purposes Under Class 1 and Class 6, Pursuant to Bankruptcy Rule 3018 (“the Debtor’s Ballot Motion”); and (3) Lincoln’s Expedited Motion to Strike Ballots of the Montgomery County Tax Claim Bureau and the Debtor’s General Partners (“Lincoln’s Ballot Motion”).
When we retracted an earlier prohibition against further plan attempts by the Debtor, and permitted the filing of the Plan now before us, it was in recognition of the Debt- or’s recently secured post-petition financing commitment, and in the hope that,, with a substantial cash-out as a real possibility, the parties would negotiate a consensual plan. Unfortunately, we were overly optimistic. It is clear to us now that both the Debtor and Lincoln perceive substantial, unrealized value in the Debtor’s only asset, two adjoining office buildings in the Philadelphia suburb of Blue Bell, Pennsylvania (“the Property”), and neither will willingly give up its claim to the Property on its own terms without a fight to
*668
the death. Thus, the Plan, which appeared to be the groundwork of a consensual reorganization, cannot be confirmed without Lincoln’s consent for many of the same technical reasons that prevented confirmation of its predecessors.
See In re Union Meeting Partners,
We have given the parties every possible opportunity to work out their differences and propose a consensual plan. We are not inclined to give them any more. Lincoln has already been granted relief from the automatic stay to attempt to foreclose its mortgage on the Property, and we have threatened to convert this reorganization case to a Chapter 7 case. Relief from the automatic stay and conversion of this case have been stayed by the District Court pending a determination of the Debtor’s appeals of Union Meeting IV to the Third Circuit Court of Appeals. Those appeals (Nos. 94-1790 and 94-1791) were originally scheduled to be argued on the date of the filing of this Opinion, February 14, 1995. The argument has been continued, possibly in anticipation of this Opinion. Assuming that our prior decisions are not disturbed on appeal, we see no alternative but to convert this bankruptcy case to a Chapter 7 case to allow the trustee, the state courts, or Lincoln’s eventual foreclosure to determine the future of the Property. In the meanwhile, we will not entertain any further requests of any party to file any further plan of reorganization unless such a plan is consensual.
B. FACTUAL AND PROCEDURAL HISTORY
The tortuous history of this case, which documents the ongoing struggle between the Debtor and Lincoln to gain control of the Property, is set forth in great detail in the four opinions already spawned by this case. In addition to
Union Meeting I, III,
and
TV
already referenced, we complete the picture by noting the presence of
In re Union Meeting Partners,
We first learned of the 1st Trust commitment on October 19, 1994, when the Debtor filed a Motion to obtain authority to (A) make a $6,750,000 loan from 1st Trust secured by a super-priority lien pursuant to 11 U.S.C. § 364(d)(1); (B) pay the allowed secured claim of Lincoln in satisfaction of Lincoln’s Mortgage; and (C) file a further amended plan (“the Financing Motion”). In the Financing Motion, the Debtor expressed a primary purpose of securing the 1st Trust financing and paying off Lincoln’s secured claim before submitting a further plan. We were unwilling to allow the Debtor to thusly “cram down” Lincoln out of the context of a bankruptcy plan. Furthermore, despite Lincoln’s initial opposition to the Financing Motion, we were nonetheless hopeful that the parties would negotiate any perceived difficulties with the Debtor’s seemingly substantial and attractive efforts to cash out Lincoln. 1 Thus, on November 17, 1994, we en *669 tered an order permitting the Debtor to file the Plan, but requiring that the financing/cash-out elements of the Financing Motion could be effectuated only through confirmation of a plan.
Our hope of an amicable resolution to this ongoing saga was diminished by Lincoln’s filing the Valuation Motion on December 15, 1994, and a set of rather frivolous objections to the Debtor’s disclosure statement (“the Disclosure Statement”) on December 16, 1994. The Valuation Motion essentially argued that the Debtor underestimated Lincoln’s secured claim in the Plan because it credited the value of post-petition Rents collected by Lincoln against Lincoln’s secured claim instead of adding that value to the secured claim. Lincoln also argued that the Debtor failed to take into account post-petition appreciation of the Property and the funds contained in the Debtor’s bank account (“the DIP Account”), which Lincoln claimed were derived from “its” Rents, when calculating its secured claim. The Debtor filed an answer the Valuation Motion on December 19, 1994.
With regard to the objections to the Disclosure Statement, we were not at all impressed with Lincoln’s arguments. We therefore had little difficulty approving the Disclosure Statement in our Order of December 22, 1994, which established deadlines for events in the confirmation process, culminating in a confirmation hearing on January 25, 1995.
On December 27, 1994, in the midst of the process of voting on the Plan, Lincoln purchased the priority tax claim of the Montgomery County Tax Bureau (“the Bureau”) for $234,903.22, its face amount. In conjunction with this purchase, the Bureau assigned its rights and interests in the claim to Lincoln, including its right to vote on the Plan. 2 Lincoln ultimately cast a ballot on behalf of the priority tax holder class rejecting the Plan. However, as established in unrebutted trial testimony, before Lincoln was able to east that vote, but after it purchased the claim, the Debtor’s counsel called the Bureau and solicited its vote directly. Although the Debtor’s counsel identified himself by his firm affiliation, he did not indicate that he was counsel for the Debtor. The Bureau’s representative, mistakenly believing that he was speaking with Lincoln’s counsel, agreed to cast a ballot on behalf of the priority tax claim. The Debtor’s counsel then completed a ballot accepting the Plan and sent it to the Bureau for signature. The Bureau’s representative signed the ballot and returned it to the Debtor’s counsel. 3 Thus, prior to the voting deadline, the Debtor received two conflicting ballots on behalf of the holder of the only Class 3 claim.
Not surprising, Lincoln filed Objections to confirmation of the Plan on January 18,1995. Therein, Lincoln identified, first, two alleged *670 Plan defects, the underestimation of its secured claim and the payment of only seven (7%) percent interest on its newly acquired priority tax claim, which it claimed gave rise to confirmation infirmities under §§ 1129(a)(7), (a)(ll), and (b)(2)(A). Lincoln also asserted that no eligible impaired accepting class had voted in favor of the Plan. See 11 U.S.C. §§ 1129(a)(10), (b)(1). Finally, Lincoln argued that the Plan violated the absolute priority rule as codified at § 1129(b)(2)(B)(ii) because the Debtor’s equity holders are permitted to retain their equity interests in the Debtor without contributing adequate new value.
On January 20, 1995, the Debtor filed its Ballot Motion, seeking the invalidation of Lincoln’s ballot filed on behalf of the priority tax claim. Therein, the Debtor argued that, pursuant to Federal Rule of Bankruptcy Procedure (“F.R.B.P.”) 3018(a), whoever held the Class 3 claim at the time that the Disclosure Statement was approved was the party entitled to vote the claim, which in this case was the Bureau. The Debtor’s Ballot Motion also asked us to fix the amount of Lincoln’s secured and unsecured claims for voting purposes. Lincoln’s opposition to the Debtor’s Ballot Motion expressed disagreement with the Debtor’s analysis of F.R.B.P. 3018(a), as it pertained to its Class 3 claim ballot. Also, with respect to the issue of the amount of its secured and total claims, Lincoln stated that it was willing to have this court decide the amounts of same.
Finally, on January 23, 1995, Lincoln filed its Ballot Motion. Therein, Lincoln asked us to strike the Class 3 ballot filed by the Bureau, in light of the confusion described above, and to strike the ballots filed by Debt- or’s partners on account of their alleged unsecured claims. Lincoln correctly points out that, in
Union Meeting I,
As scheduled, we conducted a consolidated hearing on confirmation and the various pending motions on January 25, 1995. Lincoln elicited valuation testimony from its expert appraiser, Maureen Mastroieni. Lincoln also called a representative of the Bureau, Edward J. Wilkes, Jr., to testify about the circumstances of the Class 3 voting. The Debtor called its own appraiser, James J. Betoni, as well as its managing partner, Frank R. Iacobucci. After the hearing, we permitted both sides to simultaneously file briefs on all open issues by February 6,1995, which deadline was ultimately continued until the following day on a request from the Debtor.
C. DISCUSSION
1. THE BUREAU’S BALLOT WHICH WAS CAST IN ERROR SHALL BE DISALLOWED, AND WE SHALL ONLY RECOGNIZE THE CLASS 3 BALLOT REJECTING THE PLAN CAST BY LINCOLN.
In support of its argument that we should recognize only the Bureau’s ballot, the Debtor, as noted above, relies on F.R.B.P. 3018(a) which provides, in part pertinent, that
an equity security holder or creditor whose claim is based on a security of record shall not be entitled to accept or reject a plan unless the equity security holder or creditor is the holder of record of the security on the date the order approving the disclosure statement is entered.
Because the Bureau had not yet assigned its claim to Lincoln at the time that the Disclosure Statement was approved, the Debtor argues that only the Bureau had the right to cast a vote on behalf of the priority tax claim holder. Lincoln argues that the quoted portion of F.R.B.P. 3018(a) is not relevant because the priority tax claim is not based upon a “security of record.” See 11 U.S.C. § 101(49) (definition of security). We conclude that Lincoln’s position is correct.
The portion of F.R.B.P. 3018(a) quoted above establishes the bankruptcy equivalent of a record date, which is commonly used in general corporate governance. Because corporate securities are quite liquid, and in many cases publicly traded, it is often necessary to establish a date certain prior to an upcoming corporate vote, at which time the identities of all record holders of the compa *671 ny’s shares who are entitled to vote those shares at the upcoming meeting may be definitively determined. Such a procedure allows for the creation of a comprehensive list of eligible voters, which in turn facilitates proxy mailings and prevents multiple voting on single shares and last-minute transfers of voting rights. Because these types of logistic complexities may also be present when many interest holders are voting on a plan of reorganization, F.R.B.P. 3018(a) creates the equivalent of a record date in bankruptcy to effect the same remedy.
The plain language of F.R.B.P. 3018(a), however, makes it clear that the “bankruptcy record date” does not limit a transferee’s right to vote a
claim,
but rather limits such a party’s right to vote a
security interest
only.
Cf. In re Micron Products, Inc.,
We note that, even if the procedural rules would have us recognize the Bureau’s ballot only, given the circumstances surrounding that vote and the equities of this matter, which surely do not favor the Debtor, we would construe Lincoln’s various pleadings on this issue, along with the Bureau’s testimony, as a request to change the Bureau’s vote to one rejecting the Plan, which is a request that we would grant.
See, e.g., In re American Solar King Corp.,
Apparently realizing the weakness of its argument, the Debtor, in its final brief, abandons its F.R.B.P. 3018 argument and asserts, instead, that, when Lincoln paid the priority taxes at issue, that claim vanished along with the tax lien created by it. 4 Thus, argues the Debtor, there was no claim to transfer to Lincoln, and no Class 3 claim to vote. 5 The Debtor supports this conclusion by noting that it could find no statute permitting a taxing authority to transfer its tax claim. Moreover, the Debtor justifies this conclusion by noting that Lincoln would get its money’s worth irrespective of its Class 3 vote, because the Bureau’s tax hen, which would otherwise statutorily trump Lincoln’s security interest in the Property, is removed.
We are not convinced by the Debtor’s argument. We think the relevant question is not whether the law permits such an assignment, but rather, what law, if any, prevents it. The Debtor has pointed to none. Thus, we see no reason why Lincoln could not have legally and properly purchased the Bureau’s claim, along with its lien position, as in the case of any other assignment of a secured claim.
Cf. In re Sensor Systems, Inc.,
*672 In light of the equities surrounding this particular dispute, and without any legal argument compelling a contrary result, we will allow Lincoln’s Class 3 ballot rejecting the Plan, and we will disallow the ballot mistakenly filed by the Bureau.
2. LINCOLN’S TOTAL CLAIM IS VALUED AT $9,36k,186.65 AND THE SECURED PORTION OF THAT CLAIM IS VALUED AT $6,565,-096.78.
a. The aggregate amount of Lincoln’s claim
Before we can determine the amount of Lincoln’s secured and unsecured claims separately, we must first determine the aggregate amount of its entire allowed claim. It must come as no surprise that even this figure, which has remained more or less constant by consent of the parties throughout a good portion of this case, is now in dispute in light of Lincoln’s recent assertion that it has significantly increased in the past year. Lincoln’s original proof of claim, as was initially amended prior to the bar date (“the Original Claim”), indicates an aggregate claim in the amount of $9,346,186.65. This sum is apparently equal to the pre-petition judgment secured by Lincoln on its note. Approximately one month after the bar date passed, Lincoln filed a second amended proof of claim (“the Amended Claim”), this time indicating that its aggregate claim totaled $9,587,988.50. Although not explained on the face of the Amended Claim, the increase is apparently due to a recalculation of the claim using the default rate of interest contained in Lincoln’s note. The Debtor filed an objection to the Amended Claim on December 23, 1993.
As recently noted by Judge Sigmund of this court, an amendment to a proof of claim should be freely allowed, absent prejudice to the debtor or some other prevailing equitable considerations, as long as the original proof of claim provides adequate notice to the court of the existence, nature, and amount of the claim. In re McMillan, Bankr. No. 94-13221DWS, slip op. at 3-4 (Bankr.E.D.Pa. Feb. 7,1994). See also cases cited therein.
However, courts must be careful not to allow claimants to utilize post-bar date claim “amendments” to assert entirely new claims against a debtor.
Id.
When the claimant merely seeks to add pre-petition interest to, or otherwise increase the amount of, its previously-filed claim, courts will generally permit a post-bar date proof of claim amendment.
See, e.g., In re Hemingway Transport, Inc.,
The Debtor does not dispute that Lincoln is entitled to pre-petition interest,
see, e.g., In re Orsa Associates, Inc.,
This is not the case where a claimant has forgotten to add interest to its claim altogether, an error which should be immediately recognized by a debtor.
See, e.g., Hertz, supra,
b. The value of the Property
Throughout the first two years of this case, the parties agreed that the value of the Property could be fixed by this court at $6,600,000. In the past year, however, Lincoln commissioned its appraiser Mastroieni to perform an updated valuation of the Property. This time, Mastroieni has valued the Property at $7,200,000.
The updated valuation is not without support. The Debtor has acquired some fairly substantial new and renewed leases which, in certain instances, call for substantial physical improvements to the Property at the respective tenants’ expense. Moreover, other indicators of property value, such as occupancy rate, have improved in the Blue Bell area. The real question faced by this court is whether these discrete factors warrant as much as a $600,000 increase in the Property’s value in the past year.
The Debtor’s appraiser Betoni acknowledged the improving occupancy rate and the new leases, but nonetheless concluded that these factors are more or less offset by increased expenses. Moreover, Betoni criticized Mastroieni for her use of actual tenant rollovers in the calculation of future vacancy rates. He preferred the use of a constant vacancy rate multiplier based on local historical averages.
We agree with Mastroieni that the actual rent roll of the Property should be taken into account when determining the Property’s income-stream potential, and thus its value. We question, however, Mas-troieni’s other adjustments which, in large part, result in the dramatic increase in value reflected in her report. She was simply unable to identify any convincing basis for such a large increase in value in such a short period of time. On the other hand, we do not totally accept the assertion of Betoni that the acknowledged improvement of certain factors which generally increase the value of a real property have no effect on the bottom line in this case. Doing our best to weigh this highly technical and conflicting evidence, we *674 conclude that, as of the confirmation hearing, 7 the Property had a value of $6,800,000.
c. The accumulated post-petition Rents
In our
Union Meeting I
decision,
The parties’ dispute echoes a debate on this issue being waged in the case law. These cases, like the matter before us now, share a common fact pattern and ask a common question: how should the court apply post-petition payments from rents which are made to an undersecured mortgage lender whose collateral value is appreciating or remaining consent? This single question has spawned two lines of cases reaching opposite results.
Compare Confederation Life Insurance Co. v. Beau Rivage Ltd.,
The Subtraction Cases, many of which are clustered in one court, the Northern District of Georgia, rely heavily on the Supreme Court’s decision in
United Savings Association of Texas v. Timbers of Inwood Forest Associates, Ltd.,
The Addition Cases, on the other hand, argue that a mortgage lender’s entitlement to the rents is controlled by 11 U.S.C. § 552(b). Thus, they assert, the Code itself provides for the post-petition increase in the value of the creditor’s secured claim under the circumstances encompassed by that provision. These cases attempt to reconcile Timbers by noting that, in that case, the Court was addressing the propriety of giving an undersecured creditor interest to compensate for its lost “use value,” not the propriety of paying over rents which are encumbered by the creditor’s security interest through •§ 552(b).
After carefully reviewing Timbers, the cases cited above, and § 552(b), we join the ranks of the Addition Cases, although not without a certain amount of trepidation. We agree with the Addition Cases that § 552(b) does permit, under certain circumstances, the growth of an undersecured creditor’s secured claim post-petition as indicated in the following language thereof:
if the debtor and an entity entered into a security agreement before the commencement of the case and if the security interest created by such security agreement extends to property of the debtor acquired before the commencement of the case and to proceeds, product, offspring, rents, or profits of such property, then such security interest extends to such proceeds, product, offspring, rents, or profits acquired by the estate after the commencement of the ease to the extent provided by such security agreement and by applicable nonbankrupt-cy law ... (emphasis added).
It stands to reason, then, that an underse-cured creditor’s secured claim increases as “proceeds, product, offspring, rents, [and] profits” accrue post-petition. When the Subtraction Cases claim that this post-petition inflation is contrary to Timbers and congressional intent, they are guilty of quoting Timbers out of context. In fact, the Court stated therein that
[i]n subsection (a) of [§ 506, which defines a creditor’s secured claim] the creditor’s “interest in property” obviously means his security interest without taking account of his right to immediate possession of the collateral on default. If the latter were included, the “value of such creditor’s interest” would increase, and the proportions of the claim that are secured and unsecured would alter, as the stay contin-ues_ No one suggests this was intended. The phrase “value of such creditor’s interest” in § 506(a) means “the value of the collateral.”
We find some support for our conclusion in the Timbers decision itself. First, we note that the Court may have been making a distinction between use value payments and rent payments when it stated that
[the debtor] had agreed to pay [the secured creditor] the postpetition rents from *676 the apartment project (covered by the after-acquired property clause in the security agreement), minus operating expenses. [The secured creditor] contended, however, that it was entitled to additional compensation [for lost use value]. The Bankruptcy Court agreed and ... it conditioned continuance of the stay on monthly payments by respondent, at the market rate of 12% per annum, on the estimated amount realizable on foreclosure ... commencing six months after the filing of the bankruptcy petition, to reflect the normal foreclosure delays.
Undaunted, we probe further into the Timbers opinion and find the following passage of note:
[The secured creditor’s] interpretation of § 362(d)(1) is structurally inconsistent with 11 U.S.C. § 552. Section 552(a) states the general rule that a prepetition security interest does not reach property acquired by the estate or debtor postpetition. Section 552(b) sets forth the exception, allowing postpetition “proceeds, product, offspring, rents, or profits” of the collateral to be covered only if the security agreement expressly provides for an interest in such property, and the interest has been perfected under “applicable nonbankruptcy law.” Section 552(b) therefore makes possession of a perfected security interest in postpetition rents or profits from collateral a condition of having them applied to satisfying the claim of the secured creditor ahead of the claims of the unsecured creditors. Under [creditor’s] interpretation, however, the undersecured creditor who lacks such a perfected security interest in effect achieves the same result by demanding the “use value” of his collateral under § 362.
Id.
at 374,
At least one court,
i.e., Kalian, supra,
Furthermore, we note that, under the holdings of
Commerce Bank v. Mountain View Village, Inc.,
Based on the above analyses, we conclude that the Rents received by Lincoln post-petition should be subtracted from the amount of its aggregate claim, but not from the amount of the secured portion of its claim. Accord, the Addition Cases cited at page 674 swpra.
d. The funds contained in the DIP Account
Lincoln claims that the funds contained in the DIP Account are derived from their Rents, and, therefore, based on the decisions in Union Meeting I, III, and TV, and for the reasons discussed in the immediately preceding section of this Opinion, they should be turned over to Lincoln and credited against its unsecured, deficiency claim. The Debtor, on the other hand, argues that Lincoln never established the origins of the money contained in the DIP Account. In fact, the Debtor hints, without alleging outright, that the funds may have come from contributions made by the Debtor’s partners. In any event, the Debtor argues that the funds in the DIP Account are unencumbered and may be used by the Debtor in its Plan.
Lincoln bears the ultimate burden of proving the validity and amount of its claim as well as the validity of its security interests in the Debtor’s property.
See, e.g., In re Allegheny International, Inc.,
e. Calculation of the amounts of Lincoln’s secured and unsecured claims for voting and confirmation purposes
As noted above, we conclude that Lincoln’s aggregate claim equals $9,364,186.65. Of this amount, its secured claim equals $6,565,-096.78, calculated by deducting the $234,-903.22 of prior liens 10 from the $6,800,000 *678 value of the Property. Lincoln’s unsecured claim equals $1,356,709.87, calculated by deducting, from its $9,364,186.65 total claim, the $6,565,096.78 secured claim and the $1,442,380 total amount of Rents collected and applied as of December 31, 1994. 11
3. THE DEBTOR’S PLAN CANNOT BE CONFIRMED.
In light of the Debtor’s new Plan funding source, and as a result of the Debtor’s other Plan modifications, Lincoln cannot continue to repeat many of the same Plan objections that it did in the past. For the most part, Lincoln is unable to identify any irreparable defects in the Plan. However, as intimated above, the Debtor was once again unable to secure the acceptance of an impaired class. See 11 U.S.C. § 1129(a)(10). Because Lincoln objects to the Plan on this ground, we must deny confirmation of the Plan,
a. Lincoln’s Non-§ 1129(a)(10) Confirmation Objections Do Not Appear Meritorious
First we briefly consider Lincoln’s objections to confirmation which are not based on § 1129(a)(10). Lincoln argues that the Debtor’s miscalculation of its secured and unsecured claims cause a number of confirmation problems and call into question the feasibility of the Plan. We note, however, that the Plan expressly provides for the contingency that our valuation of the claims might not match the Debtor’s estimations. The Plan, in contemplation of this contingency, provides that the partners will contribute more money to offset any deficiencies based on our valuations of the claims. Thus, if feasibility were the only Plan defect alleged by Lincoln, we would give the Debtor an opportunity to obtain additional capital from its partners and modify the Plan to take into account Lincoln’s claims, as determined herein.
Next, Lincoln asserts, without the support of ease citations or legal analysis, that it is not receiving as much under the Plan on account of its Class 3' claim as it would in a Chapter 7 liquidation because Debtor only proposes to pay interest on the claim, through the effective date of the Plan, at a rate of seven (7%) percent, as opposed to the statutory rate of nine (9%) percent. However, because the hypothetical liquidation of § 1129(a)(7) would take place on the petition date,
cf. Union Meeting II,
Finally, Lincoln claims that the Plan violates the absolute priority rule, which is codified in § 1129(b)(2)(B), by allowing the partners to retain their equity interests in the Debtor without contributing adequate new value.
See In re Wynnefield Manor Associates, L.P.,
However, there is no question that the partners have agreed to contribute more “new value” under the terms of the instant Plan than they have under the terms of past plans. For example, the Plan provides that they will contribute as much as $365,000 to meet funding shortfalls, as opposed to $200,-000 in the case of the immediately-previous plan. According to the Plan and the testimony of Iacobueci, the partners may be willing and able to pay even more if necessary to achieve confirmation. Furthermore, in order to secure the 1st Trust financing, the partners have paid a $100,000 commitment fee. They have also granted 1st Trust a security interest in some of their other, non-Debtor property, and they have agreed to guarantee the 1st Trust Loan. We disagree with Debt- or’s assertion that this “new value” equals the actual cash layout plus the amount of the Firstrust loan, or approximately $7,000,000, since the nature of some of this “new value”
*679
does not appear to qualify as “money or money’s worth.”
See Union Meeting III,
b. Lincoln’s § 1129(a)(10) Confirmation Objection Is Meritorious
Finally, we consider the Debtor’s old nemesis, § 1129(a)(10), which provides as follows: “[i]f a class of claims is impaired under the plan, [the court shall confirm the plan only if] at least one class of claims that is impaired under the plan has accepted the plan, determined without including any acceptance of the plan by any insider.” The Debtor asserts that three eligible impaired classes have accepted the Plan, (l) the Class 2 wholly unsecured second mortgage claim of E. F. Hansen, Jr. and Eileen Hansen (“the Han-sens”); (2) the Class 3 priority tax claim; and (3) the Class 6 unsecured creditor claims. As concluded above, we will not recognize the Bureau’s Class 3 ballot accepting the Plan, and, therefore, we need only consider the issues of whether Classes 2 and 6 have accepted the Plan.
We have, in the past, held that the Class 2 claim of the Hansens, who are the former owners of the Property and the holders of a $316,820 claim based on a purchase-money mortgage subordinated to Lincoln’s mortgage, was not properly classified in the Debtor’s prior plans apart from the claims of general unsecured creditors.
See Union Meeting III,
We note, however, that the conclusions reached on this issue in both
Union Meeting III
and
TV
were limited to rejection of the particular justifications for separate treatment of the Hansens’ claim articulated by the Debtor at that time. Neither decision concluded that
no
reason could be given to justify the separate classification of the Class 2 claim.
See Union Meeting TV,
slip op. at 8 (“Therefore, absent the Debtor’s proffer of another reason to create a separate class to house the second mortgage lien, Class 3 [now Class 2] should not have been an independent class.”); and
Union Meeting III,
The Debtor now points out that a
wholly unsecured
mortgage claim, unlike the unsecured portion of an
undersecured
mortgage claim, maintains its subordinate lien on its collateral if not bifurcated under the Code. The Debtor notes that Lincoln has taken no action to bifurcate the lien of the Class 2 claimant. Therefore, the Debtor concludes, the Class 2 claim is different from the general unsecured claims in that it has a lien which can pass through the bankruptcy unaffected.
See Dewsnup, supra,
The Debtor tries to take the next step required by John Hancock, supra, by noting that it was required to bifurcate this lien itself, through the Plan, in order to secure the 1st Trust financing. Again, even if this is true (although we are not sure why 1st Trust would insist on the removal of this hen if its proposed financing was to be approved by this court on a priority basis as requested, see 11 U.S.C. § 364(d)), we fail to see the connection between this fact and the necessity to separately classify this claim. The Debtor obviously did not have to “pay” the Hansens anything for the loss of their Hen. 12 As in the Debtor’s prior plans, the Plan provides that the Hansens will receive the exact same treatment as the Debtor’s other general unsecured creditors. We conclude that the Debtor did not have to treat the Class 2 claim more favorably in return for bifurcation of its Hen, and therefore the separate classification of the Hansens’ claim was not required.
With aH other possibiHties removed, we again conclude that the separate classification of the Class 2 claim could only have been “motivated by [Debtor’s] desire to circumvent § 1129(a)(10).”
Union Meeting III,
The Debtor cites to one case in which a debtor was allowed to separately classify the claim of a wholly unsecured junior mortgagee,
In re Stratford Associates, L.P.,
In the alternative, the Debtor asserts that, if Lincoln is correct and the Rents are subtracted from its unsecured deficiency claim, then Lincoln’s resulting unsecured claim wiH not be large enough to dictate the vote of Class 6 containing the general unsecured claims. Our calculations do not bear this out. First, despite the Debtor’s newly proffered evidence,
i.e.,
the introduction of a note and the Partnership Agreement reciting a debt of the Debtor to the parties for their contributions, we remain unconvinced that the partners’ contributions were unsecured loans instead of equity contributions. The deaHngs between the Debtor partnership and its partners were insider deaHngs which may have significance in evaluating the interests of the partners
inter se
in the equity of the Debtor. However, they are not arm’s length loan transactions with third-party creditors. In Hght of our prior holdings that the partners’ claims are in fact equity contributions,
see Union Meeting III,
Because neither Classes 2, 3 or 6 constitute eligible impaired classes which have voted to accept the Plan, the Plan has failed to meet the requirement of 11 U.S.C. § 1129(a)(10). We must therefore deny confirmation of the Plan on this ground.
D. CONCLUSION
Although we are not willing to go so far as to say that no single asset debtor should be allowed to reorganize under Chapter 11, this court’s exercises in this case poignantly illustrate the futility and waste of many such cases. Under the caselaw developed, whether intentionally or not, by the Third Circuit Court of Appeals, it is certainly made difficult for such a debtor to “cram down” a plan opposed by the debtor’s primary secured lender.
See In re Swedeland Development Group, Inc.,
Single-asset partners often contribute a great deal of money and “sweat equity” to their real estate projects, and their desire to preserve any equity potential is understandable. On the other hand, we can also sympathize with mortgage lenders who have loaned great sums of money and simply want some of the benefit of their bargains in a downsized real estate market. Despite these rational objectives, we do not believe that the bankruptcy Code, under the caselaw as it has developed in this Circuit, is the most feasible tool to utilize to resolve these types of disputes. The normal societal gains from business reorganizations,
i.e.,
protecting jobs and/or maintaining economic stability,
compare In re Mayer Pollock Steel Corp.,
Given the small benefit to be gained from many of these single asset cases, it is hard to justify the costs of dollars and time which mount when these cases drag on. The instant bankruptcy case has been pending for over two years. We have been asked to consider seven plans of reorganization and, in the process, have had to dispose of countless motions and objections. This ease alone has now generated four lengthy opinions at this level and has required the intervention of two levels of appellate courts. This outpouring of labor is justified only as a one-time project to guide similarly-situated parties in the future. All the while, administrative expenses continue to climb in this case, eating away any unencumbered assets which might otherwise be available to the unsecured creditors and *682 any value which might otherwise be created by the acquisition of attractive new tenants or small recoveries by the local real estate market.
We have the continued authority and the obligation to preside over this particular case, and we cannot allow this futile process to continue any longer. If and when we are freed from the District Court’s stay order, we will immediately convert this case to a Chapter 7 case. In the meanwhile, we will not consider any further plans of reorganization in this case unless they are supported by both the Debtor and Lincoln, nor much at all in this case unless the doubtful prospect that the Court of Appeals will infuse single-asset cases by limiting its former holdings occurs in the resolution of the appeals in this case which are presently before that Court.
An Order consistent with this Opinion shall be entered.
ORDER
AND NOW, this 14th day of February, 1995, upon consideration of (1) the request of UNION MEETING PARTNERS (“the Debtor”) to confirm its Fourth Amended Plan of Reorganization (“the Plan”) over the objection of its primary mortgage lender, Lincoln National Life Insurance Co. (“Lincoln”); (2) Lincoln’s Motion for Valuation of Secured Claim (“the Valuation Motion”); (3) the Debtor’s Motion Pursuant to 11 U.S.C. § 1126(e) to Designate Ballot Submitted by Lincoln in Class 3 and to Fix the Amount of Lincoln’s Claim for Voting Purposes under Class 1 and Class 6, Pursuant to Bankruptcy Rule 3018 (“the Debtor’s Ballot Motion”); and (4) Lincoln’s Expedited Motion to Strike Ballots of the Montgomery County Tax Claim Bureau and the Debtor’s General Partners (“Lincoln’s Ballot Motion”), and upon careful review of all pleadings; the record made, including a consolidated hearing on all of the above matters on January 25, 1995; and the parties’ post-trial briefs, it is hereby ORDERED AND DECREED as follows:
1.Lincoln’s aggregate claim is fixed at $9,364,186.65. Its remaining secured claim is fixed at $6,565,096.78. Its net unsecured claim is fixed at $1,356,709.87. The difference between the amount of Lincoln’s aggregate claim and the sum of its secured and unsecured claims represents the amount of rent payments already advanced to Lincoln throughout the course of this case and payments to be received on account of its Class 3 claim.
2. The Debtor’s Ballot Motion is DENIED IN PART AND GRANTED IN PART. We will not disallow the ballot filed by Lincoln on behalf of the Class 3 claim, but instead, shall disallow the Class 3 claim mistakenly filed by the Montgomery County Tax Bureau (“the Bureau”). For the purposes of Plan voting, Lincoln’s secured and unsecured claims shall equal the amounts set forth in paragraph 1 of this Order.
3. Lincoln’s Ballot Motion is GRANTED. As noted in paragraph 2 of this Order, the Class 3 ballot mistakenly filed by the Bureau is disallowed. Further, the Class 6 unsecured claim ballots filed by the partners on behalf of what this court has already determined to be equity contributions shall be disallowed.
4. Confirmation of the Plan is DENIED.
5. Unless a motion consistent with this Opinion requesting a different disposition is made and if the stay of our prior Orders is dissolved, this case shall be immediately, without further notice or hearing, converted to a Chapter 7 case and Lincoln will be permitted to proceed to exercise its state-law rights in reference to the Debtor’s real property located at 920A and 920B Harvest Drive, Blue Bell, Pennsylvania.
Notes
. As noted above, these hopes were not realized. Perhaps we should have anticipated Lincoln's pertinacity given the tone and content of its Answer to the Financing Motion filed on November 9, 1994. Therein, Lincoln complained, inter alia, that the cash-out contemplated by the Financing Motion would rob it of its election under 11 U.S.C. § 1111(b), an election which it declined to exercise in the past; was unlikely to exercise in any plan confirmation context, since it would loosen its grasp of an objection to confirmation under 11 U.S.C. § 1129(a)(10); and which it predictably opted not to exercise in conjunction with the Plan.
. Because the Bureau held the only claim in Class 3 of Debtor’s Plan, and because the claim was impaired by the Plan, we assume that Lincoln purchased the claim in order to foreclose the possibility that the Bureau would vote in favor of the Plan, thus supplying Debtor with an impaired accepting class, which is a prerequisite to confirmation under 11 U.S.C. §§ 1129(a)(10), (b)(1). Although we had earlier held that a class of unsecured priority tax claimants cannot serve as an impaired accepting class for the purposes of § 1129(a)(10),
see Union Meeting III,
. We are dismayed by the involvement of the Debtor’s counsel in this episode. Although the Bureau's representative testified that counsel made no affirmative misrepresentations, it certainly appears that counsel was guihy of misrepresentation by omission. Such conduct might have supported our imposition of sanctions against counsel, and same would be imposed if any similar conduct were repeated in the future.
. The Debtor's assertion that the tax lien was automatically expunged is based on the statement of Wilkes that it is his belief that the Bureau no longer holds a lien on the Property for the taxes paid by Lincoln. This lay testimony, however, hardly proves the point.
. This argument of the Debtor that the Class 3 claim has disappeared gets it no closer to identifying Class 3 as the impaired accepting class needed to satisfy § 112 9(a)( 10). It seems to us that the Debtor has therefore already resigned itself to finding an impaired accepting class elsewhere, and would therefore prefer to see Class 3 disappear along with the confirmation objections raised by Lincoln in its role as the holder of the Class 3 claim.
.Because the Debtor treats the Class 3 claim as a secured claim rather than as a priority claim under § 507(a)(7), this is not a case where a subrogee is attempting to assert the priority position of the governmental taxing authority in contravention of 11 U.S.C. § 507(d).
See, e.g., In re Davis,
. For the purposes of confirmation, secured creditors' collateral must be valued at the time of confirmation.
See, e.g., In re Jablonski,
. This conclusion results in the "wash” notion first articulated by the court in
Flagler, supra,
. Of course, it is possible that a creditor's secured claim which is expanding under § 552(b) may become so large as to eat up any deficiency and call into play § 506(b). At that point, the creditor would become entitled to interest on its claim. Any rents collected beyond that, however, would revert to the debtor. To the extent that a secured creditor would keep on collecting the rents beyond this point, the debtor would begin to realize a dollar for dollar equity in the other collateral, generally the real property. A creditor, after all, is not entitled to more than the amount of its claim plus interest and any properly assessed costs.
.
See 222 Liberty, supra,
. Of course, this number has already grown larger. Because any differences caused by subsequent Rent collections would not alter the outcome of our decision, we use the Rent figure as of December 31, 1994, as a convenience.
. Our conclusion is supported by the fact that the existence of the Hansens' lien did not provide the Hansens with any real leverage in any event. A debtor’s right to bifurcate a creditor’s lien into its secured and unsecured portions and “strip down” a totally undersecured claim to an unsecured claim in a Chapter 11 case is unqualified.
See
11 U.S.C. § 506(a); and
In re DeSeno,
. This issue is not discussed in Union Meeting IV, leading us to suspect that the Debtor abandoned any dispute of this decision on appeal.
. The instant Debtor was apparently unable to impair its tenants’ claims, either because the absence of security deposits meant that its tenants were not creditors, or it lacked confidence concerning the continued satisfaction of its valued tenants if it impaired their claims, or both.