In re Voboril

Stephen Voboril (debtor) filed for bankruptcy. The bankruptcy trustee asserted his strong-arm power to avoid transfers of Voboril’s property that were not properly perfected under state law. Such a power allows the trustee to avoid prebankruptcy transactions; in this case, the prebankruptcy transaction was a lien that was argued to be unperfected. The trustee argued that liens asserted by First Bank Financial Centre (First Bank) (creditor) in regard to two pieces of property had not been properly perfected and could be avoided. Specifically, Voboril had executed a security agreement giving First Bank a security interest in a promissory note and insurance-renewal commissions. First Bank then filed a financing statement but placed Voboril’s name in the incorrect box on the form, listing “Stephen R. Voboril” as an organization name and not an individual name. While the financing statement was entered into the Wisconsin state database, a search request using Voboril’s name as an individual would not locate First Bank’s financing statement. The relevant Wisconsin law provided that a financing statement was not effective if it was rendered seriously misleading by errors or omissions such that it failed to provide the name of the debtor unless a search under the filing office’s system using the correct name would disclose the financing statement. The trustee argued that because a search of Voboril’s name as an individual returned no result, the financing statement was misleading and ineffective. First Bank argued that because a search of Voboril’s name as an organization would locate the financing statement, it was not misleading or ineffective.