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Lanza (D) filed a petition for reorganization under chapter 11. First Peoples National Bank (P) filed three proofs of claim. D conveyed a mortgage on a parcel of real estate to P in exchange for a construction loan with which to improve the subject property. This mortgage was executed for a denominated indebtedness of $200,000.00 although only $125,000.00 was advanced at settlement. P later advanced $170,000.00 through a series of unsecured loans, none of which, P concedes, were charged against the original mortgage. P's auditors read P the riot act so P convinced d to grant another mortgage for $350,000.00 using the now improved property as collateral and allocating $125,000.00 of the proceeds to satisfy the original mortgage and $177,520.00 to discharge the unsecured indebtedness and interest. The mortgage was then properly filed and recorded. P presented conflicting testimony on the outstanding balance remaining on the mortgage. The second proof is based on a demand note and a properly recorded mortgage which secures a principal debt of $24,500.00, plus interest to date, for a total sum of $40,282.60. The third proof of claim asserts an outstanding unsecured indebtedness of $27,639.62. The parties are in apparent agreement that this claim accurately expresses the outstanding indebtedness. D objected to the first claim because of P’s poor documentation.

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