## Facts

- Stephen R. Voboril earned ongoing insurance-policy renewal commissions based on prior sales, including after retirement.
- First Bank Financial Centre made a loan to Voboril Financial, LLC, which Voboril personally guaranteed.
- Voboril signed a “Collateral Assignment of Renewal Commissions” in favor of First Bank as collateral security for repayment of indebtedness.
- First Bank did not file a financing statement to perfect any security interest created by that collateral assignment.
- Voboril later executed a security agreement granting First Bank a security interest in (i) a promissory note payable to Voboril and (ii) insurance renewal commissions.
- First Bank filed a UCC-1 financing statement with Wisconsin’s filing office, but entered “Stephen R. Voboril” in the organization-debtor name field rather than the individual-debtor name field.
- Wisconsin’s filing system separates individual-debtor and organization-debtor records; a standard search using Voboril’s correct individual name did not reveal a financing statement indexed as an organization filing.
- After Voboril filed Chapter 7, the trustee invoked 11 U.S.C. § 544(a) to avoid First Bank’s asserted liens as unperfected under Wisconsin law and moved for summary judgment.

## Issues

1. Whether First Bank’s interest in Voboril’s insurance renewal commissions was subject to Article 9’s filing rules (and not excluded by an exception), such that the Bank’s failure to file left the interest unperfected and avoidable under 11 U.S.C. § 544(a).
2. Whether First Bank’s UCC-1 financing statement was “seriously misleading” under Wis. Stat. § 409.506 because it misidentified an individual debtor as an organization, so that a standard search under the debtor’s correct individual name would not disclose the filing.
3. Whether, if the Bank’s interests were unperfected as of the petition date, the trustee could avoid them under § 544(a).

## Decision

- The court granted the trustee’s motion for summary judgment.
- Renewal commissions: the court held the Bank’s interest was within Article 9 (as receivables-type collateral such as accounts) and required perfection by filing; because First Bank did not file a financing statement for the collateral assignment, the security interest was unperfected and avoidable.
- Promissory note (and the collateral described in the filed UCC-1): the court held the financing statement was seriously misleading because the debtor’s name was placed in the wrong debtor-name field and the filing was not disclosed by a search using the correct individual name under the filing office’s standard search logic; the filing was therefore ineffective to perfect.
- Because the Bank’s interests were unperfected on the petition date, the trustee could avoid the Bank’s liens under § 544(a).

## Legal Principles

- Under 11 U.S.C. § 544(a), a bankruptcy trustee has the rights of a hypothetical judicial lien creditor as of the petition date and may avoid a security interest that is unperfected under applicable state law.
- UCC Article 9 applies to transactions that create a security interest in personal property, including rights to payment such as “accounts” and related receivables collateral.
- Unless a specific Article 9 exception applies, perfection of a security interest in receivables-type collateral is generally accomplished by filing a financing statement.
- The Article 9 exception for an assignment of a single account, payment intangible, or promissory note in full or partial satisfaction of a preexisting debt is construed narrowly and does not apply where the transaction functions as continuing collateral security for indebtedness (including indebtedness that may exist now or later).
- Under Wis. Stat. § 409.506 (UCC § 9-506), a financing statement that fails to provide the debtor’s name as required is “seriously misleading,” unless a search of the filing office records using the correct name and the office’s standard search logic would disclose the financing statement (the statutory safe harbor).
- If the filing office’s standard search logic will not return the record because the filer placed an individual debtor’s name in the organization-debtor field, the safe harbor does not save the filing, and the financing statement is ineffective.

## Conclusion

In In re Voboril, the bankruptcy court held that First Bank’s asserted liens in the debtor’s insurance renewal commissions and a promissory note were unperfected under Wisconsin’s Article 9 rules: the Bank never filed to perfect the collateral assignment of commissions, and its later UCC-1 was ineffective because it misfiled the individual debtor as an organization, making the financing statement seriously misleading under the state’s standard search logic. As a result, the Chapter 7 trustee could avoid both liens under 11 U.S.C. § 544(a).


In re Voboril, 2017 WL 1048041 (2017)