MEMORANDUM OF DECISION

ALFRED C. HAGAN, Chief Judge.

Daniel Zaleha ("debtor") is the debtor in this chapter 11 bankruptcy. Two basic matters are before the Court. First is confirmation of the debtor's proposed chapter 11 plan. Two creditors of the debtor, Rosholt, Robertson Tucker ("Rosholt Robertson") and Toyota Motor Credit Corporation ("TMCC"), both oppose confirmation. Debtor disputes the objections of both Rosholt Robertson and TMCC. Debtor also challenges Rosholt Robertson's standing to object to confirmation. Debtor additionally moves to subordinate Rosholt Robertson's claim, and for sanctions against Rosholt Robertson for bad faith.

The second issue before the Court is the debtor's motion for a stay pending appeal of the Court's decision of August 31, 1993. That decision concluded the debtor's contract for an automobile through the TMCC was a true lease, not a sale contract, and the debtor was required to assume or reject the lease under 11 U.S.C. § 365. TMCC opposes any stay.

FACTS

The debtor is an attorney, formerly employed by Rosholt Robertson. A significant dispute arose between the debtor and Rosholt Robertson in the fall of 1992, as a result of which the debtor was fired. The debtor alleges he was unlawfully terminated as a result of his religious beliefs, and lists in his schedules numerous potential causes of action. Rosholt Robertson has appealed a decision awarding the debtor unemployment compensation. On August 10, 1993, the debtor filed a complaint with the Idaho Human Rights Commission for religious discrimination.

In 1992, while still employed at Rosholt Robertson, the debtor became indebted to Bruce Smith ("Smith"), a partner with the firm, in the amount of $300.00 for an office couch. Debtor filed this chapter 11 petition in March, 1993; Smith was listed in the debtor's schedules as an unsecured creditor. The debtor's disclosure statement and first proposed plan were filed May 21, 1993, and this Court subsequently approved distribution of the disclosure statement and proposed plan to creditors. Rosholt Robertson filed an objection to the debtor's proposed plan on September 3, 1993, the last day to file an objection and less than three weeks after Rosholt Robertson was served with the debtor's complaint before the Idaho Human Rights Commission.

Rosholt Robertson bases its appearance in this case on its status as the assignee of Smith's $300 claim. Rosholt Robertson did not vote on the debtor's plan, nor did it file a notice of a transfer of claim under Rule 3001(e)(2). Other than the objection to confirmation itself, there is nothing in the file to confirm that Rosholt Robertson has actually been assigned Smith's claim.

The debtor filed a first amended plan on September 10, 1993. The amended plan deals in part with the result of this Court's decision of August 31, 1993. In that decision, the Court granted TMCC's motion to require debtor to assume or reject his lease of an automobile. Debtor proposes to pay TMCC the amount due monthly under the automobile lease, without curing any default. In the event debtor's appeal is successful, the debtor's contract would be modified to a sale agreement, as set forth in the debtor's original chapter 11 plan. The payments made during the pendency of the appeal would be applied to the modified contract balance, and TMCC would be required to refund any over-payment. If the appeal is unsuccessful, debtor will assume or reject the lease as required by section 365. If the appeal runs longer than the remaining term of the lease, debtor will continue to make payments, such payments to be first applied to the current arrearage (approximately $819), then to the price of the lease's option to purchase. TMCC objects to being locked into a plan in which its rights are contingent on the debtor's success on appeal.

Debtor also moves that the August 31, 1993 decision be stayed pending the determination of the appeal. TMCC opposes the stay.

1. STANDING OF ROSHOLT ROBERTSON TO OBJECT TO PLAN.

Debtor's challenge to the standing of Rosholt Robertson is moot with regard to confirmation. Rosholt Robertson's objection is that the debtor's proposed plan does not meet the "best interest of creditors" test of section 1129(a)(7). "Regardless of whether a valid objection to confirmation has been asserted, the Code imposes upon the Court a mandatory duty to determine whether a plan meets all the requirements for confirmation delineated in § 1129(a) of the Code." In re Future Energy Corp., 83 B.R. 470, 481 (Bankr.S.D.Ohio 1988). See In re Mid Pacific Airlines, Inc., 110 B.R. 489, 490 (Bankr.D.Hawaii 1990) (same); 11 U.S.C. § 1129(a) ("The court shall confirm a plan only if all of the following requirements are met") (emphasis added). The plan proponent bears the burden of proving that the requirements of section 1129(a) have been met. Mid Pacific Airlines, supra, 110 B.R. at 490 (plan proponent bears burden of showing that every requirement of section 1129(a) has been met); Future Energy, supra, 83 B.R. at 481 (same); In re Martin, 66 B.R. 921, 925 (Bankr.D.Mont. 1986) (burden to show compliance with sections 1129(a) and (b) is on proponent).

Even if Rosholt Robertson lacked standing, the Court would have to examine the grounds of the objection to determine whether the debtor's proposed plan should be confirmed. Decision of the standing issue is therefore not strictly necessary for this Court to resolve the question of confirmation. However, because the issue of Rosholt Robertson's standing is likely to arise again in this case, and because fairly frequent questions arise regarding (1) the trading of claims in bankruptcy, and (2) the effect of a failure to comply with Rule 3001(e)(2) on a party's ability to assert standing as a party in interest, the standing issue will be addressed.

Section 1128(b) limits standing to object to a proposed chapter 11 plan to "part[ies] in interest." The term "party in interest" is not defined in the Bankruptcy Code, although both section 1109(b) and section 1121(c) provide partial definitions. 11 U.S.C. § 1109(b) (standing to appear); 11 U.S.C. § 1121(c) (standing to file a plan); see In re Rook Broadcasting of Idaho, Inc., 154 B.R. 970, 972 (Bankr.D.Idaho 1993). The term "party in interest" includes "a creditor." 11 U.S.C. § 1109(b), 1121(c). This district has indicated on several occasions that the term "party in interest" is expandable, and is evaluated on a case-by-case basis. Rook, supra, 154 B.R. at 972; In re Chandler Airpark Joint Venture I, 92 I.B.C.R. 23, 25, 163 B.R. 566 (Bankr.D.Idaho 1992) (Pappas, J.).

There is no per se rule denying "party in interest" status to the purchaser of a claim against a bankrupt. See Rook, supra, 154 B.R. at 972-73; In re First Humanics Corp., 124 B.R. 87 (Bankr.W.D.Mo. 1991). Debtor objects to granting this claim "party in interest" status, however, on the grounds that Rosholt Robertson failed to comply with Rule 3001(e)(2) of the Federal Rules of Bankruptcy Procedure. This rule requires a party to give notice to the Court if the party is transferred a claim after a proof of claim has already been filed. Debtor asserts Rule 3001(e)(2) applies because Smith was listed in the debtor's schedules as a creditor, and a proof of claim is therefore deemed filed under section 1111(a). Rosholt Robertson argues the debtor does not have standing to assert failure to comply with Rule 3001(e)(2). Rosholt Robertson also contends the only reason it has not complied with the rule is that it did not have sufficient time to do so before the confirmation hearing.

It has previously been suggested that a party's failure to comply with Rule 3001(e)(2) does not necessarily deprive the party of standing as a "party in interest." See Rook, supra, 154 B.R. at 974; Sullivan Central Plaza I, Ltd. v. BancBoston Real Estate Capital Corp. (In re Sullivan Central Plaza I, Ltd.), 935 F.2d 723, 727 (5th Cir. 1991). The Court now expressly holds that failure to comply with Rule 3001(e)(2) does not, without more, deprive a party of standing as a party in interest.

As already discussed, the term "party in interest" includes "creditors;" it therefore includes parties holding contingent, unliquidated, disputed claims. See 11 U.S.C. § 101(10)(A) ("creditor" is an entity with a "claim"); 11 U.S.C. § 101(5)(A) ("claim" includes rights to payment that are unliquidated, contingent, and disputed). A properly filed proof of claim is prima facie valid unless and until there is an objection. 11 U.S.C. § 502(a); F.R.B.P. 3001(f). Despite the fact the claim may be subject to a good faith dispute regarding its very existence, such a claim need not be determined or allowed before the party will have standing as a "party in interest."

In the case of a contingent, unliquidated, disputed claim, it is the obligation itself that is disputed. In the case of a transfer after a proof of claim is filed, there may be no dispute regarding the validity of the debt; the only dispute may be whether the alleged transferee does in fact have title to the claim. Such is the case here, where debtor contests only Rosholt Robertson's title to a concededly valid obligation. There is no reason to distinguish between a contingency or dispute based on whether a party's claim is valid, and a contingency or dispute based on whether one party or another holds the claim. If the holder of a contingent, disputed, unliquidated claim is entitled to standing as a party in interest, so is the holder of a claim whose interest is contingent or disputed because of an alleged postpetition transfer.

Moreover, if the proper notice is given, the transfer is treated as prima facie valid. The only obstacle to the transferee obtaining this status is the filing of proper notice with the court. This is comparable to the prima facie validity given to proofs of claim.

There is also the nature of Rule 3001(e)(2) itself. The purpose of clearing the court record of ambiguities regarding who actually holds a claim is to establish who will be entitled to notice regarding the case, and distribution (if any) from the estate. This in no way affects the potential interest a party may have in the case, however. Appearances in bankruptcy cases are not limited to those creditors who file a proof of claim or are listed in the debtor's schedules. It is the existence of an interest potentially affected by the matter before the Court that determines standing. See Chandler Airpark, supra, 92 I.B.C.R. at 25, 163 B.R. at 569 (evaluating "party in interest" requires "determin[ing] whether a party has a sufficient stake in the outcome of a case so as to require its representation").

In light of these considerations, as well as the fact Rosholt Robertson's failure to comply with Rule 3001(e)(2) prior to the hearing was a result of time pressure only, I conclude Rosholt Robertson has standing as a "party in interest."

Debtor contends Rosholt Robertson should be denied standing as a party in interest because of inequitable conduct. Debtor relies on the case of In re Keyworth, 47 B.R. 966 (D.Colo. 1985). In that case, the court held the transferee of a claim would be denied standing as a party in interest because the transferee was a defendant in a state court lawsuit filed by the debtor, and the claim had been purchased for no reason other than to harass the debtor or obtain an advantage in the state court litigation. 47 B.R. at 971-72.

I decline to impose such a sanction here. The court in Keyworth relied upon the nature of the bankruptcy court as a court of equity, and concluded the actions of the defendant/transferee created a threat to the integrity of the judicial system that exceeded the interest in the spirit and intent of the Bankruptcy Code. 47 B.R. at 971. There is insufficient evidence of inequitable conduct to justify such sanctions here. I have already noted that the grounds for Rosholt Robertson's objection would have to be examined by this Court even if no objection had been made. The fact Rosholt Robertson objected has not placed on the debtor any greater burden than he would have faced if no objection had been made. Whether or not it has standing, Rosholt Robertson merely explicitly presented to the Court a matter the Court would consider regardless. Moreover, the issue presented by Rosholt Robertson's objection is colorable, not frivolous. There is no reason to penalize a creditor who has standing under the Bankruptcy Code for bringing to the Court's attention a colorable issue the debtor would face in any event. I also note that Rosholt Robertson did not vote its claim in order to avoid the appearance of trying to derail the debtor's bankruptcy. For these reasons, the debtor's motion for sanctions will also be denied.

Debtor's motion to subordinate Rosholt Robertson's claim under 11 U.S.C. § 510 is also denied. There is insufficient evidence to suggest Rosholt Robertson acted so inequitably that its claim should be penalized in favor of other creditors. See 11 U.S.C. § 510(c)(1). In fact, the opposite is the case; Rosholt Robertson objects to the plan for failing to provide for certain assets to be distributed to the creditors, so unsecured creditors may be benefitted, not harmed, by Rosholt Robertson's action.

2. OBJECTION OF ROSHOLT ROBERTSON.

Rosholt Robertson objected to the debtor's proposed plan for failure to comply with the "best interests of creditors" test of 11 U.S.C. § 1129(a)(7)(A). This section provides a plan cannot be confirmed where an impaired class has not accepted the plan, and the class will receive less under the plan than it would receive in a chapter 7 liquidation. The claim assigned by Smith to Rosholt Robertson is a Class 9 claim (unsecured consumer claim) under the debtor's proposed plan. Class 9 is an impaired class that did not accept the plan; only 64.35% of the total amount of claims owing voted to accept the plan, where 66.67% is required for acceptance. The essence of Rosholt Robertson's objection is that debtor has not valued his cause of action against Rosholt Robertson for unlawful discrimination, nor has the debtor provided for the proceeds of that lawsuit to be distributed to creditors in the event of a recovery. As a result, Rosholt Robertson contends Class 9 creditors will not receive more than they would in a chapter 7 liquidation, in violation of section 1129(a)(7)(A)(ii).

The debtor listed his potential cause of action against Rosholt Robertson in both his schedules and his disclosure statement. The cause of action has not been valued, and the debtor has not claimed an exemption for any proceeds. Because it arose prepetition, the potential cause of action against Rosholt Robertson is property of the estate. See Sierra Switchboard Co. v. Westinghouse Electric Corp., 789 F.2d 705, 707-09 (9th Cir. 1986) (cause of action for emotional distress was property of the estate). There is no provision for distribution of any of the net recovery from this claim to creditors.

I have already noted that the debtor bears the burden of showing compliance with every requirement of section 1129(a). More specifically, it has been held that a plan proponent bears the burden of proving a proposed plan meets the "best interest of creditors" test of section 1129(a)(7)(A)(ii). Future Energy, supra, 83 B.R. at 489. A hypothetical chapter 7 liquidation in this case would give unsecured creditors a pro rata distribution of the net proceeds of any judgment against Rosholt Robertson. In the debtor's proposed chapter 11 plan, creditors will at best receive only a fixed dollar amount of any such recovery. On these facts, it is impossible to determine whether creditors will receive more under the plan than they would receive in a chapter 7 liquidation. In fact, there is substantial reason to believe creditors will receive less than in a hypothetical chapter 7 liquidation. The debtor has not met his burden of proof, and the plan cannot be confirmed. In re Rusty Jones, Inc., 110 B.R. 362, 373-74 (Bankr.N.D.Ill. 1990) (plan provision to give creditors only 80% of any recovery on cause of action, when creditors would receive 100% in chapter 7, violated "best interests of creditors" test). Cf. Future Energy, supra, 83 B.R. at 489 n. 33 (in assessing a hypothetical chapter 7 liquidation, the court must value possible recoveries in future actions to avoid preferences or fraudulent transfers).

3. OBJECTION OF TMCC.

The validity of debtor's treatment of TMCC is also at issue. TMCC objects to the manner in which debtor treats its claim by making its treatment contingent on the debtor's success in appealing this Court's decision of August 31, 1993. As already mentioned, that decision held the agreement between TMCC and the debtor was a lease of an automobile, and not a disguised sale.

There is no reason to deny confirmation of a plan because it provides for contingent treatment of a creditor, so long as all contingencies are provided for and no single contingency, if triggered, violates the requirements of a confirmed plan. If the debtor in this case prevails on the appeal of the lease decision some provision will have to be made regarding how completed plan payments will be applied. The proposed plan requires that TMCC receive lease payments as though no appeal had been made and the debtor acquiesced in the Court's decision. TMCC has not alleged, nor has this Court discovered, that any of the possible contingencies would cause TMCC's treatment under the plan to violate section 1129. Since none of the contingencies are invalid, and since TMCC's rights as a result of the Court's decision are adequately protected by the plan, this provision does not prevent confirmation.

This Court also notes the plan cannot be confirmed for another reason not presented by any of the parties. As previously mentioned, Class 9 is an impaired class. Only 64.35% in amount of Class 9 claims were voted to accept the plan, where 2/3 of the amount (66.67%) is required for acceptance. 11 U.S.C. § 1126(c). The plan therefore does not meet the requirements of section 1129(a)(8) because an impaired class has not accepted the plan. The debtor has not shown the plan complies with section 1129(b), which is the only means by which a plan can be confirmed despite noncompliance with section 1129(a)(8). In fact, the plan fails the "absolute priority rule" of section 1129(b)(2)(B)(ii), because the debtor would retain property under the plan when his interest is junior to that of Class 9 creditors.

4. MOTION TO STAY AUGUST 31, 1993 DECISION PENDING APPEAL.

Debtor has asked the Court to stay the decision of August 31, 1993, pending appeal. Debtor alleges that TMCC is adequately protected during the pendency of the appeal by the provisions of his proposed plan.

Rule 8005 of the Federal Rules of Bankruptcy Procedure permits a bankruptcy court to grant a stay pending appeal. That rule must also be read in conjunction with Rule 7062. 9 Lawrence P. King, Collier on Bankruptcy ¶ 8005.03, at 8005-4 (15th ed. 1993). Rule 7062 is also applicable to contested matters such as the one appealed from here. F.R.B.P. 9014.

In general, courts decide whether to issue a stay pending appeal based on a standard similar to that used to decide whether to grant a preliminary injunction. Schrader v. Idaho Dep't of Health and Welfare, 590 F. Supp. 554, 560 (D.Idaho 1984), reversed on other grounds, 768 F.2d 1107 (9th Cir. 1985). As this district has stated:

In this circuit there are two interrelated legal tests for the issuance of a preliminary injunction. The tests are not separate, but rather represent the outer reaches of a single continuum. . . . At one end of the continuum, the moving party is required to show both a probability of success on the merits and the possibility of irreparable injury. At the other end of the continuum, the moving party must demonstrate that serious legal questions are raised and that the balance of hardships tips sharply in its favor. The relative hardship to the parties is a critical element in deciding at which point along the continuum a stay is justified.

Schrader, supra, 590 F. Supp. at 560 (citation omitted).

The Court does not believe the debtor has a probability of success on the merits. However, review of the record indicates serious legal questions are raised in the debtor's appeal.

Additionally, the balance of hardships tips sharply in the debtor's favor, given the treatment proposed by the debtor for the duration of the stay. TMCC faces little burden from the stay. The debtor will provide TMCC with lease payments as if the decision had not been stayed and the debtor had assumed the lease. In fact, with the exception of curing the $819 default, TMCC is treated exactly as though no stay had been granted.

Conversely, the debtor may face a substantial burden if the stay is not granted. Requiring the debtor to assume or reject the lease at this point could force the debtor to reject it. Even if the debtor prevailed on appeal, he would not be able to complete his purchase the vehicle, which is one of the debtor's goals in bankruptcy. In other words, if the action is not stayed, debtor may be deprived of any remedy even if he succeeds on appeal.

The debtor requests a stay through the completion of an appeal to the U.S. Court of Appeals for the Ninth Circuit. In the absence of the protections proposed by the debtor in his first amended plan of reorganization, such a lengthy period of time could cause substantial harm to TMCC. TMCC would be deprived of the benefit of lease payments, while at the same time the value of the leased property would continue to depreciate. However, as discussed above, the debtor's first amended plan cannot be confirmed, and thus the provisions of the first amended plan are not made binding on the debtor through the confirmation process.

This Court is empowered to "make any . . . appropriate order during the pendency of an appeal on such terms as will protect the rights of all parties in interest." F.R.B.P. 8005. "Thus, the bankruptcy judge is given broad powers to stay its own orders and judgments pending appeal." 9 Collier on Bankruptcy ¶ 7062.07, at 7062-9.

The stay pending appeal will be granted. Because no plan has been confirmed, however, the continuation of this stay will be conditioned on TMCC receiving the treatment proposed in the debtor's first amended plan. See Hadley v. Victory Construction Co., Inc. (In re Victory Construction Co., Inc.), 9 B.R. 570, (Bankr.C.D.Cal. 1981) (finding a stay pending appeal analogous to the automatic stay, the court granted a stay pending appeal conditioned on the debtor's payment of adequate protection), vacated on other grounds, 37 B.R. 222 (9th Cir. B.A.P. 1984). Specifically, with the exception of curing the existing $819 default, the debtor will be and remain subject to all of the terms and conditions of the original lease agreement with TMCC as though he had assumed the lease under section 365. The Court will retain jurisdiction over this stay during the appeals process; in the event of a material default on these conditions, TMCC shall be entitled to seek relief from stay. Upon conclusion of the appeals process, payments received during the pendency of the appeal will be applied as set forth in the debtor's first amended plan. On the facts of this case, these conditions represent a fair compromise between the competing interests of the debtor and TMCC.

A separate order will be entered.