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Full Opinion
INTRODUCTION
The debtor in this Chapter 11 case owns a gas station and convenience store. The debtor seeks final approval of its disclosure statement and confirmation of its plan of reorganization. Two objections were filed: one by the debtor's largest secured creditor, and another by a large unsecured creditor. The secured creditor also filed a motion for relief from the automatic stay. For the reasons set forth in this opinion, the Court will grant final approval of the disclosure statement, deny confirmation of the plan of reorganization, and grant the motion for relief from the automatic stay.
JURISDICTION
The Court has jurisdiction over these matters pursuant to
PROCEDURAL HISTORY
On November 21, 2017, Cheerview Enterprises, Inc. ("Cheerview") filed this Chapter 11 bankruptcy case. On January 12, 2018, a secured creditor, Stockbridge Acquisitions, LLC ("Stockbridge") filed a motion for relief from the automatic stay ("Motion for Stay Relief"). On January 26, 2018, U.S. Venture, Inc., d/b/a U.S. Oil ("U.S. Oil"), claiming that it too is a secured creditor, filed a concurrence and joinder in the Motion for Stay Relief. Cheerview filed a response to the Motion for Stay Relief.
On February 19, 2018, Cheerview filed a combined disclosure statement and plan of reorganization. Two days later, Cheerview filed a first amended combined disclosure statement and plan of reorganization. Consistent with its ordinary practice, and with the Chapter 11 case management order that it entered earlier in this case, the Court granted preliminary approval of the first amended disclosure statement, set deadlines for voting and for objections, and scheduled a hearing regarding final approval of the first amended disclosure statement and confirmation of the first amended plan of reorganization. Stockbridge and U.S. Oil each objected, both to the adequacy of the information in the first amended disclosure statement and to confirmation of the first amended plan of reorganization. In addition, Stockbridge and U.S. Oil each filed an election under § 1111(b) of the Bankruptcy Code to have their respective claims treated entirely as allowed secured claims. On April 19, 2018, Cheerview filed a summary of the ballots and the status of the objections to its first amended disclosure statement and plan of reorganization.
*888On April 20, 2018, the Court held a hearing on Cheerview's request for final approval of the first amended disclosure statement and confirmation of the first amended plan. At the same time, the Court also held a hearing on the Motion for Stay Relief. Just prior to the hearing, Cheerview filed a second amended combined disclosure statement and plan of reorganization. After listening to arguments by lawyers for Cheerview, Stockbridge and U.S. Oil, the Court found that there are disputed issues of material fact that require the Court to hold an evidentiary hearing. Cheerview also informed the Court that it intended to file a third amended combined disclosure statement and plan of reorganization. The Court adjourned the hearings and set some deadlines, both for the filing of Cheerview's third amended combined disclosure statement and plan of reorganization, and for any supplements to the objections filed by Stockbridge and U.S. Oil.
On May 1, 2018, Cheerview filed a third amended combined disclosure statement and plan of reorganization ("Third Amended Disclosure Statement and Plan"). Stockbridge and U.S. Oil filed supplements to their objections.
The Court held an evidentiary hearing over two days, May 30, 2018 and June 1, 2018. Cheerview called four witnesses: Mohamad Berro, Hassan Ouza, Fadi Elghoul, and Michael Zerka. The Court admitted into evidence Cheerview's exhibits 1 through 15, and 18. Stockbridge called Kassem Beydoun as its only witness. The Court admitted into evidence Stockbridge's exhibits A and B. U.S. Oil did not call any witnesses or offer any exhibits of its own, but participated in the evidentiary hearing. On June 4, 2018, the Court heard closing arguments and permitted the parties to file post-trial briefs. Following receipt of the post-trial briefs, the Court took the matters under advisement. This opinion constitutes the Court's findings of fact and conclusions of law with respect to the Third Amended Disclosure Statement and Plan and the Motion for Stay Relief.
FACTS
Based on the evidence adduced at the evidentiary hearing, and from its review of the entire case file, the Court finds the following facts.
Cheerview is a Michigan corporation that owns a gas station and convenience store located at 700 South Waverly, at the corner of St. Joseph, in a busy traffic area in Lansing, Michigan ("Property"). In early 2015, Mohamad Berro ("Berro"), then a 26-year old individual who owned an oil change business, learned that the stock in Cheerview was for sale. Ali Damsaz ("Damsaz"), a shareholder in Cheerview, told Berro this was a good location and that Berro could basically run the business from his home if he kept the same employees. Berro purchased the stock sometime in 2015 and became the sole owner of Cheerview.
At the time of the purchase, SSB Bank held a first mortgage on the Property to secure two promissory notes made by Cheerview. In addition, Cheerview was party to a petroleum supply agreement with U.S. Oil pursuant to which U.S. Oil sold Exxon Mobil Oil petroleum products to Cheerview to sell at the Property. U.S. Oil also held a mortgage on the Property to secure payment by Cheerview for the products that it purchased under the petroleum supply agreement. The record does not show how much was owed by Cheerview either to SSB Bank or to U.S. Oil when Berro purchased Cheerview, but there is no dispute by any party that SSB Bank and U.S. Oil had agreed between themselves that U.S. Oil's mortgage was *889subordinate to SSB Bank's mortgage up to $360,000.00.
When Berro purchased the stock in Cheerview, he planned to have Cheerview continue to make the payments on the SSB Bank mortgage and continue to purchase gas from U.S. Oil under the petroleum supply agreement. Although Cheerview would continue to own the Property after Berro purchased Cheerview, Berro formed a new corporation known as Mikey's Fuel Mart, Inc. ("Mikey's") to operate the gas station and convenience store.
Berro was an absentee owner. After acquiring Cheerview, he continued to work full time in his oil change business and only went out to the Property about once a month. He also took Damsaz's advice and kept the existing Cheerview employees to run the business. That turned out to be a big mistake. At least one of those employees, and maybe more, were stealing from the business. It took awhile for Berro to discover the theft. Once he did, he fired the employees and filed a police report.
Sometime in 2016, Mikey's hired Hassan Ouza ("Ouza"), a long time personal friend of Berro, to help him deal with Cheerview's problems. Although only in his early 30's, Ouza had managed and otherwise worked in gas stations for over 15 years. However, Berro and Ouza were unable to turn Cheerview's business around.
U.S. Oil's records (exhibit 14) show that the gas station at the Property sold approximately 35,000 gallons of gas per month during 2016. The largest sales month was March, 2016, with 51,392 gallons sold. The 2016 federal income tax return for Mikey's (exhibit 11) shows that Mikey's lost $75,428.00 on gross receipts of $1,056,341.00 in 2016. Losing money and unable to make its payments to SSB Bank, U.S. Oil and its other creditors, Mikey's shut down the operation of both the gas station and the convenience store in August, 2017. The Property has been shuttered since that date.
Although the precise date is not clear from the record, both SSB Bank and U.S. Oil began foreclosure proceedings on their respective mortgages in mid-2017. Also not clear from the record is exactly how much Cheerview owed on the SSB Bank and U.S. Oil mortgages at that time. However, Berro does not dispute that the balance owed on the two mortgages at that time was greater than the value of the Property. Cheerview's schedules (exhibit 5) list the SSB Bank debt as $403,000.00 and the U.S. Oil debt as $42,000.00 when Cheerview filed its bankruptcy petition in November, 2017. Cheerview's schedules list the value of the Property at the time of the bankruptcy petition as $200,000.00. At the trial, Berro testified that he now estimates the value of the Property and its contents to be $250,000.00. That is roughly consistent with the value of the Property assessed by the Eaton County Treasurer (exhibit 10). Neither Stockbridge nor U.S. Oil dispute this estimate. Based on Berro's testimony, the tax assessment, and the absence of any dispute by Stockbridge and U.S. Oil, the Court finds that the value of the Property on the date of the bankruptcy petition was $250,000.00.
Despite the failure of the business, and even though the value of the Property is far less than the mortgages on it, the Property is still considered by others in the gas station industry to be a good location for a gas station and convenience store.
*890Safeway Oil Company ("Safeway") owns, operates and supplies petroleum products to more than 50 gas stations and convenience stores in the metropolitan Detroit area. Beydoun is the president of Safeway. Beydoun is also the managing member of Stockbridge. Sometime in September, 2017, Beydoun learned through a broker about the pending foreclosure of the SSB Bank mortgage on the Property. Beydoun arranged to have Stockbridge purchase the SSB Bank mortgage so that he could acquire the Property for a Safeway gas station. On October 3, 2017, SSB Bank sold Stockbridge all of its rights in and to the Cheerview mortgage debt on the Property. Stockbridge continued the foreclosure proceedings that SSB Bank had started on the Property.
As the foreclosure proceedings brought by Stockbridge and U.S. Oil came to a head, Cheerview filed its Chapter 11 petition. However, just before it filed the petition and even though Cheerview had no income - since both the gas station and convenience store remained closed - Cheerview decided to have some work done on the Property by Fadi's Heating and Cooling ("Fadi's"), a contractor located in Dearborn Heights, Michigan, owned by Fadi Elghoul ("Elghoul"), a distant relative and friend of Ouza's family.
On November 6, 2017, Ouza and Berro contacted Elghoul and requested that Fadi's install an ice machine, repair the compressor, and do some other work on the Property. They told Elghoul that they could not pay for the work at that time, but that they would be able to pay for it in a couple of weeks when they expected to reopen the gas station and convenience store. They also told him that payment would be secured and, if they failed to pay, Fadi's could pick up the equipment that it installed.
Even though the Property is located in Lansing, outside the geographic region where Fadi's ordinarily works, and even though Ouza and Berro said they could not pay for the work they were requesting, Elghoul agreed to have Fadi's do the work because Elghoul had done work for Ouza's family members for over 20 years, including work on some very large projects, and has a long time friendship with the family. Elghoul did not hire a lawyer to represent Fadi's in this transaction because Ouza and Berro told him that they would handle all the paperwork for him.
On November 7, 2017, Elghoul sent two Fadi's employees out to the Property to do the work. When the work was done, Elghoul gave Cheerview a Fadi's invoice (exhibit 3), dated November 7, 2017, for $8,360.00. Berro and Ouza gave Elghoul a security agreement (exhibit 4) signed by Berro on behalf of Cheerview that grants Fadi's a security interest in the ice machine, compressor, and other parts. This was not something that Elghoul was familiar with, and not something Fadi's had previously used in its business. Nor was it something that Berro and Ouza had ever done. However, again because of his long standing relationship with the Ouza family, Elghoul agreed that Fadi's would accept the security agreement to secure Cheerview's payment to Fadi's.
Cheerview did not pay the Fadi's invoice. But Cheerview's attorney took some action to protect Fadi's. On the same morning that Cheerview filed its Chapter 11 petition, Cheerview's attorney filed a UCC-1 financing statement (exhibit 2) that he had prepared describing the ice machine, compressor, and other parts that served as collateral for Cheerview's debt owed to Fadi's. Neither Berro, Ouza nor Elghoul had ever seen the UCC-1 financing statement before it was filed, nor did any of them know that it was being filed *891by Cheerview's attorney on the morning of the Chapter 11 filing. Fadi's is still owed $8,360.00 for the work that it did on the Property.
Since the filing of this Chapter 11 case, Cheerview has not transacted any business. But the Third Amended Disclosure Statement and Plan states that Cheerview intends to now reopen the gas station and convenience store. Toward that end, Cheerview has entered into two specific transactions, subject to Court approval, that Cheerview believes will enable it to reopen the business and become profitable going forward.
First, on November 1, 2017, Cheerview entered a Business Property Lease ("Waverly Lease") (exhibit 7) with Waverly Food Service, Inc. ("Waverly"). Waverly is a corporation newly formed by Ouza for the purpose of operating the gas station and convenience store at the Property. Ouza is the president and sole owner of Waverly. The Waverly Lease is a three year lease with multiple options to extend. It provides for monthly rent of $1,700.00. Although the Waverly Lease states that it is effective November 1, 2017, Waverly has not yet taken possession of the Property, paid any rent, or operated any business either at the Property or elsewhere.
Second, on April 13, 2018, Cheerview entered into a series of agreements ("RPF Agreements") (exhibit 18) with RPF Oil Company ("RPF"), a gas supplier for approximately 85 gas stations, that primarily sells BP products. Under Cheerview's prior agreement with U.S. Oil, Cheerview purchased gas from U.S. Oil and then Cheerview set its own price to sell the gas at the Property. In contrast, under the RPF Agreements, Cheerview will not purchase any gas, but instead RPF will provide gas to Cheerview and then pay Cheerview a 4% commission on any gas that Cheerview sells. Under this arrangement, RPF will determine the price at which Cheerview sells the gas and RPF will also maintain the pumps and control all aspects of the sale of gas by Cheerview. The RPF Agreements require Cheerview to sell a minimum of 70,000 gallons per month, because that is what BP requires, and give RPF the right to terminate the RPF Agreements if the minimum sales are not met. The RPF Agreements contain some inconsistencies within them. However, when read together, they appear to be for a 10 year term that requires Cheerview to sell 8,400,000 gallons, with the first two years tied to the commission arrangement, but with Cheerview having an option to get out of the commission arrangement for the remaining eight years, and convert to an arrangement where Cheerview will purchase gas from RPF and set its own price for the gas that it sells. The RPF Agreements are personally guaranteed by Berro and Ouza.
The Third Amended Disclosure Statement and Plan is accompanied by projections ("Projections") (exhibit 6) of Cheerview's operations for the next 60 months. The Projections are expressly based on the premise that Cheerview will sell 54,000 gallons of gas per month under the RPF Agreements. Except for the 4% commission to be received from RPF for the gas sold by Cheerview, the other line items on the Projections for income and expenses are largely taken from the historical experience of Mikey's, as shown on its financial statement for 2016 (exhibit 11). All of those line items remain constant over the 60 months covered by the Projections. The Projections assume that Ouza and Berro will both work full time at the gas station and convenience store and that they will have one part-time employee as well. The Projections assume net revenue more than double the net revenue of Mikey's, and *892show how that net revenue will be used to pay Cheerview's creditors.
ISSUES
Cheerview, Stockbridge, and U.S. Oil raise a number of legal issues and Bankruptcy Code sections that the Court must consider regarding: the adequacy of the information disclosed by Cheerview under § 1125; the effect of the § 1111(b) elections by Stockbridge and U.S. Oil; whether Fadi's is an insider under § 101(31); whether Fadi's acceptance of the Third Amended Disclosure Statement and Plan should be designated under § 1126(e); the application of plan confirmation standards under § 1129(a) and (b); and the criteria for automatic stay relief under § 362. The Court will first discuss the adequacy of Cheerview's information, and then turn to plan confirmation issues, including issues relating to the claims and ballots of Stockbridge, U.S. Oil, and Fadi's. The Court will conclude with a discussion regarding automatic stay relief.
THE DISCLOSURE STATEMENT
Section 1125(b) of the Bankruptcy Code states that acceptance or rejection of a Chapter 11 plan of reorganization may not be solicited unless at the time or before such solicitation, there is transmitted to the holder of a claim the plan or a summary of the plan, and a written disclosure statement approved by the court as containing adequate information. Section 1125(a)(1) defines adequate information as meaning "information of a kind, and in sufficient detail, as far as is reasonably practicable in light of the nature and history of the debtor and the condition of the debtor's books and records, ... that would enable [ ] a hypothetical investor of the relevant class to make an informed judgment about the plan[.]" Section 1125(a)(1) further instructs that in determining whether a disclosure statement has adequate information, "the court shall consider the complexity of the case, the benefit of additional information to creditors and other parties in interest, and the cost of providing additional information[.]"
In the Chapter 11 case management order that the Court entered in this case on January 5, 2018, the Court permitted Cheerview to file a combined disclosure statement and plan of reorganization, and described the procedure to obtain preliminary approval of the disclosure statement, so that the combined disclosure statement and plan of reorganization could be transmitted to parties in interest together. The Court routinely employs this fast-track procedure in smaller Chapter 11 cases as long as there is no objection to such procedure by any party in interest after notice and hearing. The Court adopted this fast-track procedure for smaller cases because it eliminates unnecessary, time consuming and costly litigation concerning the adequacy of the disclosure statement. Under this procedure, the Court reviews the combined disclosure statement and plan of reorganization as soon as it is filed. If the Court finds that preliminary approval of the disclosure statement is warranted, the Court enters an order granting preliminary approval of the disclosure statement and setting deadlines for parties in interest to object to final approval of the disclosure statement as well as to vote on and file objections to the plan of reorganization. The Court then hears any objections to final approval of the disclosure statement at the same time that it hears any objections to confirmation of the plan of reorganization. No party in interest objected to using this procedure in this case.
After the Court granted preliminary approval to the Third Amended Disclosure *893Statement and Plan,
First, the Disclosure Statement fails to provide sufficient information regarding the RPF Agreements. Stockbridge argues that the RPF Agreements are inconsistent with statements in the Disclosure Statement and with Berro's and Ouza's testimony regarding the requirements that the RPF Agreements impose on the amount of gas Cheerview must sell, the payment of the commission by RPF to Cheerview, Cheerview's hours of operations, the marketing to be undertaken by RPF, the terms of a $45,000.00 signing bonus to be paid by RPF to Cheerview, and the remedies available to RPF if Cheerview defaults under the RPF Agreements.
Second, the Disclosure Statement fails to provide sufficient information regarding the Waverly Lease. Stockbridge points out that the Waverly Lease is initially for a term of three years, yet the Plan proposes payments for 20 years. Further, because Waverly is a brand new corporation, Waverly has no history of operations to help evaluate whether it will be capable of performing the terms of the Waverly Lease.
Cheerview did not designate on its Chapter 11 petition that this case is a "small business case" within the meaning of § 101(51C) of the Bankruptcy Code. Instead, it designated this case as a "single asset case." Putting aside for the moment whether this was an accurate designation, this case is not by any measure a large or complex bankruptcy case. Cheerview is a closely held corporation that has just one shareholder. According to Cheerview's schedules (exhibit 5), the total value of its assets is $210,000.00, consisting entirely of a shuttered gas station and convenience store located on the Property. Cheerview's schedules show total debts of $481,360.00 owed to a handful of creditors. This is neither a large nor complex case.
The Disclosure Statement contains an extended discussion of the RPF Agreements and the Waverly Lease, both of which are attached in their entirety to the Disclosure Statement. The Disclosure Statement also contains an extended discussion of the only two principals of Cheerview and Waverly, Berro and Ouza, and includes the 2016 financial statement and tax return for Mikey's, the entity that operated the gas station and convenience store during 2016, the only full year of operations after Berro acquired Cheerview. It is true that the Disclosure Statement does not say much about Waverly, but it does not seem that there is much to tell since Waverly is a brand new corporation with no prior experience or operations to discuss.
Fairly read, the substance of Stockbridge's objection goes not to the adequacy of the information regarding the RPF Agreements and Waverly Lease, but instead to Stockbridge's contention that the Plan, which is predicated on the RPF Agreements and Waverly Lease, is just not a feasible plan of reorganization. That is a plan confirmation objection, not a disclosure statement objection.
*894It is also worth noting that the only party complaining about the adequacy of Cheerview's information is Stockbridge. Stockbridge bought the SSB Bank mortgage debt after the gas station and convenience store were closed, and less than two months before this Chapter 11 case was filed. By Beydoun's own admission, Stockbridge did not purchase the mortgage debt to collect payment on it, but made the purchase for the express purpose of foreclosing the mortgage to gain ownership of the Property so that Stockbridge can open its own gas station on the Property. Beydoun, the president and owner of Stockbridge, and the person who devised this strategy, has been in the gas station business for nearly three decades, owns or operates over 50 gas stations already, has extensive expertise in this industry, and is very knowledgeable about the past operations and future prospects of business at the Property. What else does he need to know about Cheerview to implement his stated goal to vote no on the Plan? Stockbridge does not identify any benefit that could possibly be gained either by Stockbridge or by any other creditor by insisting on more information in the Disclosure Statement.
The Court rejects Stockbridge's objection to the adequacy of the information contained in the Disclosure Statement. The Court finds that the information contained in the Disclosure Statement is adequate under § 1125(a)(1) to enable a hypothetical investor to make an informed judgment about the Plan, given the size and complexity of this case, the cost of additional information and the absence of any benefit to creditors by requiring additional information.
THE PLAN
Section 1129(a) of the Bankruptcy Code states that the Court shall confirm a plan of reorganization only if all 16 of the requirements of that subsection are met. As the proponent of the plan, Cheerview has the burden of proving that all of the requirements for confirmation have been met. In re Waterford Hotel, Inc.,
Section 1129(a)(8)
Section 1129(a)(8) contains one of the most fundamental requirements for confirmation of a Chapter 11 plan of reorganization: each class of impaired claims must vote to accept the plan. Section 1126(c) states that a class of clams has accepted a plan of reorganization if such plan has been accepted by creditors "that hold at least two-thirds in amount and more than one-half in number of the allowed claims of such class," without counting the acceptance by any entity whose acceptance was designated as lacking good faith pursuant to § 1126(e). Federal Rule of Bankruptcy Procedure 3018(c) prescribes the procedure to accept or reject a plan of reorganization: an acceptance or rejection must be in writing, signed by the claimant, and conform to the Official Form prescribed by the Judicial Conference of the United States. The statute and rule make clear that a claimant's acceptance of a plan of reorganization requires an affirmative act - a written acceptance on the prescribed form. The statute and rule do not authorize the Court to infer a claimant's acceptance just because the claimant did not vote to reject a plan of reorganization.
*895The Plan has four classes of claims. The Plan states that all four classes of claims are impaired. Class 1 consists of Eaton County Treasurer's secured claim for $24,000.00. Class 2 consists of Stockbridge's secured claim for $403,000.00. Class 3 consists of Fadi's secured claim for $8,360.00. Class 4 consists of unsecured claims totaling $283,500.00.
No ballot was received from the sole claimant in Class 1, Eaton County Treasurer. That makes Class 1 a non-accepting impaired class. The sole claimant in Class 2, Stockbridge, voted to reject. That makes Class 2 a non-accepting impaired class. The sole claimant in Class 3, Fadi's, voted to accept. That makes Class 3 an accepting impaired class.
The voting in Class 4 requires a bit of explanation. According to Cheerview's ballot summary (exhibit 1), two ballots were received from unsecured claims in Class 4: Stockbridge and U.S. Oil, both of which voted to reject. However, because Stockbridge, the holder of the first mortgage on the Property, made an election under § 1111(b)(1)(A), Stockbridge's entire claim is allowed as a secured claim under § 1111(b)(2).
In contrast, the ballot filed by U.S. Oil rejecting the Plan is properly counted in Class 4. Like Stockbridge, U.S. Oil, which holds the second mortgage on the Property, made an election under § 1111(b)(1)(A) to have its entire claim allowed as a secured claim. However, § 1111(b)(1)(B) expressly states that an entity may not elect application of § 1111(b)(2) to have its entire claim allowed as a secured claim if the interest of such entity in the property that secures its claim is of inconsequential value. In this case, the uncontroverted evidence establishes the value of the Property at $250,000.00. The Plan states - and no party disputes - that Stockbridge is owed $403,000.00 on its claim, its claim is secured by a mortgage on the Property, and its mortgage has priority over U.S. Oil's mortgage up to $360,000.00. Because the balance (i.e., $360,000.00) owing on Stockbridge's mortgage that has priority over U.S. Oil's mortgage far exceeds the value (i.e., $250,000.00) of the estate's interest in the Property, there is no equity in the Property to support U.S. Oil's mortgage. That means that the interest of U.S. Oil as the holder of a second mortgage on the Property is of inconsequential value. As a result, U.S. Oil is not eligible to elect under § 1111(b)(1)(A) to have its entire claim allowed as a secured claim under § 1111(b)(2). U.S. Oil's ballot rejecting the Plan is therefore properly counted in Cheerview's ballot summary as an unsecured *896claim in Class 4. That makes Class 4 a non-accepting impaired class.
To recap, for purposes of § 1129(a)(8), there are three non-accepting impaired classes of claims: Class 1, Class 2, and Class 4. The Court finds that the Plan does not meet the requirement of § 1129(a)(8).
Section 1129(a)(10)
Section 1129(a)(10) is another plan confirmation requirement that focuses on the votes that are cast on a plan. It sets a separate requirement for plan confirmation that is independent of the requirement in § 1129(a)(8). Section 1129(a)(10) states that if the plan impairs a class of claims, then "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 an insider."
The Plan expressly states that it impairs Classes 1 through 4. As explained earlier, Classes 1, 2, and 4 have not accepted the Plan. The only impaired class that has accepted the Plan is Class 3. Ordinarily, because Class 3 is an impaired accepting class, that would be enough for the Court to find that the Plan meets the requirement of § 1129(a)(10). However, Stockbridge and U.S. Oil advance four reasons why Class 3's acceptance of the Plan does not satisfy § 1129(a)(10) : first, Fadi's does not hold an allowed claim against Cheerview that it can vote in any class; second, even if Fadi's does hold an allowed claim against Cheerview, the security interest held by Fadi's is a preferential transfer, the avoidance of which means that Fadi's does not hold a secured claim entitled to vote in Class 3, but only an unsecured Class 4 claim; third, even if Fadi's does hold an allowed secured claim in Class 3, the acceptance of the Plan by Class 3 does not count because Fadi's is an insider; and fourth, in any event, under § 1126(e), the Court should designate Fadi's acceptance of the Plan as not in good faith. The Court will address each of these reasons in sequence.
1. Does Fadi's hold an allowed claim against Cheerview?
Cheerview's schedule D (exhibit 5) lists Fadi's as the holder of a secured claim in the amount of $8,360.00. Because this claim is not listed as disputed, contingent, or unliquidated, under Fed. R. Bankr. P. 3003(c)(2), Fadi's is not required to file a proof of claim. But Stockbridge and U.S. Oil urge the Court to disregard Fadi's claim because it was entirely contrived by Cheerview on the eve of the bankruptcy case to manufacture a friendly class of claims to vote in favor of the Plan. They point out that when Ouza and Berro contacted Elghoul on November 6, 2017 to have Fadi's do some work on the Property, the gas station and convenience store had been shut down for three months and Cheerview was already planning a bankruptcy filing. To Stockbridge and U.S. Oil, the timing is suspicious: without having any business operations at all, Cheerview chose that particular time to focus on installing an ice machine, which was the major part of the work, at the Property. Stockbridge and U.S. Oil argue that in these circumstances, Fadi's claim should not be allowed against Cheerview. Moreover, because Waverly is responsible for improvements to the Property under the Waverly Lease, if Fadi's does hold a claim at all for payment for this work, it is a claim against Waverly and not Cheerview.
It does seem odd that Cheerview, although transacting no business, and with the Property shuttered for some time, would decide in early November to have an ice machine installed just as Cheerview was planning to file Chapter 11. Cheerview's decision to take that particular action, at that particular moment, may well reflect on Cheerview's good faith. But the uncontroverted testimony at trial showed *897that Fadi's did the work at the Property and is owed $8,360.00 for the work. And there is no evidence in the record to indicate that the debt exceeds the value of the work. Further, despite Stockbridge's and U.S. Oil's contention that it should be Waverly, not Cheerview, that is responsible for payment to Fadi's, Elghoul, Berro and Ouza all testified consistently that it is Cheerview, not Waverly, that agreed to pay for the work and owes the debt to Fadi's.
Even if Stockbridge and U.S. Oil are right - that Cheerview deliberately incurred the Fadi's debt for strategic reasons to help Cheerview in its upcoming Chapter 11 case - that does not alter the fact that the work was done and the invoice was not paid. Nor does it mean that the Court should disregard the Fadi's claim or otherwise find it unenforceable. The Court finds that Fadi's holds an allowed claim for $8,360.00 against Cheerview.
2. Was the grant of a security interest to Fadi's a preferential transfer?
Stockbridge and U.S. Oil next argue that even if Fadi's does hold an allowed claim against Cheerview, the grant of the security interest to Fadi's is avoidable as a preferential transfer under § 547 of the Bankruptcy Code. Specifically, they argue that because Fadi's did not perfect its security interest when it was granted, and only perfected it later on November 21, 2017, the transfer is avoidable because it was made on account of an antecedent debt. If the transfer is avoided, then Fadi's will hold only an unsecured claim entitled to vote in Class 4, and not a secured claim entitled to vote in Class 3.
Cheerview responds that there is no avoidable preferential transfer because Fadi's security interest was perfected when the UCC-1 financing statement was filed within 30 days after Cheerview took possession of the ice machine and other parts supplied by Fadi's.
Cheerview is correct. Under the security agreement, Cheerview granted Fadi's a purchase money security interest in the equipment Fadi's installed at the Property. Assuming that all the elements of a preferential transfer under § 547(b) are met, § 547(c)(3)(B) provides that a trustee may not avoid a transfer "that creates a security interest in property acquired by the debtor ... that is perfected on or before 30 days after the debtor receives possession of such property[.]" Stockbridge's and U.S. Oil's argument is based on the assumption that the equipment on which Cheerview granted Fadi's the security interest was delivered to Cheerview before the gas station was shut down in August, 2017, which would place the perfection far outside the 30-day safe harbor provision. The evidence is to the contrary. Cheerview acquired the equipment on November 7, 2017, and Fadi's perfected its purchase money security interest in that equipment on November 21, 2017. This was well within the 30-day safe harbor of § 547(c)(3)(B). Whatever other legal consequences may flow from Cheerview's decision to incur a debt to Fadi's and perfect Fadi's security interest moments before filing Chapter 11, the grant of Fadi's security interest is not a preferential transfer that is avoidable by Cheerview. Fadi's claim against Cheerview is a secured claim.
3. Is Fadi's an insider?
Stockbridge and U.S. Oil next argue that even if Fadi's does hold a secured claim entitled to vote in Class 3, the Court should find that Fadi's is an insider under § 101(31) of the Bankruptcy Code. If Fadi's is an insider, Fadi's vote to accept the Plan cannot count for purposes of determining whether the Plan complies with § 1129(a)(10).
*898Section 101 of the Bankruptcy Code is titled "Definitions." Section 101(31) refers to the term "insider," but does not actually define the term. Instead, § 101(31) contains a non-exclusive list of entities that the Bankruptcy Code deems to be insiders. The non-exclusive list under § 101(31) varies, depending upon whether the debtor is an individual, a corporation, or other entity. According to the legislative history that accompanies § 101(31), an insider is one who has a close relationship with a debtor in a bankruptcy case that goes beyond a typical arm's-length debtor/creditor relationship:
Because of his close relationship with the debtor, an insider typically knows more about the debtor's financial affairs than the debtor's other creditors, and is often in a position to influence or control, at least in part, the debtor's actions. An insider is usually the first to know that a debtor is contemplating bankruptcy. Armed with this information and power to control the debtor, the insider may step ahead of other creditors demanding payment and then influence the timing of the debtor's bankruptcy petition to avoid the ninety-day preference period. By extending the preference liability of insiders to one year, Congress made it more difficult for an insider to manipulate the timing of bankruptcy so as to avoid the effect of the preference section.
Jahn v. Economy Car Leasing, Inc. (In re Henderson ),
Bankruptcy courts refer to the non-exclusive list of entities in § 101(31) as statutory insiders. Inclusion in that list reflects a Congressional determination that an entity having the attributes of one of those specific relationships is always an insider of the debtor because, by virtue of such status alone, that entity is always in a position to influence or control, at least in part, a debtor's conduct.
But even if an entity is not a statutory insider included in the list in § 101(31), the statute permits a court to examine the specific facts surrounding a particular relationship of an entity to the debtor to determine whether that relationship, although not making an entity a statutory insider, is one that calls for closer scrutiny than an arm's-length relationship. If so, a court may still find such entity to be an insider. These relationships are frequently referred to as non-statutory insiders.
Stockbridge and U.S. Oil initially asserted that Elghoul is a relative of either Berro or Ouza of the kind that would automatically make him a statutory insider under § 101(31). After hearing the testimony at trial that Elghoul is a distant relative of Ouza and that his only relation to Berro is that his wife's mother is Ouza's grandfather's sister, Stockbridge and U.S. Oil no longer assert that Elghoul is a statutory insider under § 101(31). But Stockbridge and U.S. Oil do contend that the relationship between Fadi's and Cheerview is sufficiently close that Fadi's should be found to be a non-statutory insider under § 101(31).
*899The evidence demonstrates that Fadi's is most certainly a friendly creditor. Elghoul has a long-time very friendly relationship with the Ouza family. Because of that friendly relationship, Elghoul allowed his wholly owned company, Fadi's, to do work for Cheerview even though the work was in a geographic region beyond the area where Fadi's typically works and, more importantly, even though the work would not be paid for when completed in accordance with Fadi's ordinary business terms. Fadi's did the work for Cheerview without being paid for it, and without Cheerview having any means to pay for it, and instead took a security interest in certain of Cheerview's assets. Elghoul permitted this even though he had never transacted business like this before, was not at all familiar with the paperwork for a transaction of this kind, and depended entirely on Berro and Ouza to handle the paperwork.
The evidence establishes that Elghoul basically did Cheerview a favor by having Fadi's perform work without getting paid and taking a security interest instead of payment. But there is no evidence that Elghoul had more knowledge of Cheerview's financial affairs than Cheerview's other creditors, which allowed Fadi's to gain some influence or control over Cheerview or some other advantage over the other creditors of Cheerview. Nor is there any evidence that Elghoul ever exerted or attempted to exert any control over Berro, Ouza, or Cheerview. Extending credit to Cheerview on the eve of its filing a bankruptcy case did not allow Fadi's to step ahead of other creditors demanding payment from Cheerview. If anything, it exposed Fadi's to a risk of non-payment by an entity whose assets were worth far less than the amount of its debts. Further, there is nothing in the record to suggest that Fadi's manipulated Cheerview in any way, as to either the timing of the work that Fadi's did for Cheerview or the timing of the grant of the security interest to secure payment. To the extent that there is any inference to be drawn that one party may have manipulated another party, it is not that Fadi's manipulated Cheerview, but instead is that Cheerview manipulated Fadi's. The Court finds that Fadi's is not an insider under § 101(31).
4. Should the Court designate Fadi's vote under § 1126(e)?
Finally, Stockbridge and U.S. Oil argue that the Court should apply § 1126(e) to designate Fadi's acceptance of the Plan as not being in good faith. Section 1126(e) states that on request of a party in interest, after notice and a hearing, the Court may designate any entity whose acceptance or rejection of a plan was not in good faith, or was not solicited or procured in good faith. "Under this section, the court can disallow the vote of any creditor who acts in bad faith in either voting or soliciting votes for or against a plan." 255 Park Plaza Assocs. Ltd. P'ship v. Conn. Gen. Life Ins. Co. (In re 255 Park Plaza Assocs. Ltd. P'ship ), Additional Information