“Thus, Pankratz’ financing statement using the misspelled name of the debtor, while prior in time, was seriously misleading, …” —Davis, Justice 

Facts: Rodger House purchased a tractor on credit from Pankratz Implement Company. House signed a note and security agreement that made the tractor collateral for the repayment of the debt. The creditor filed a financing statement with the Kansas secretary of state using the misspelled name of the debtor, “Roger House,” rather than the correct name of the debtor. “Rodger House.” One year later, House obtained a loan from Citizens National Bank (CNB). House gave a security interest to CNB by pledging all equipment that he owned and that he may own in the future as collateral for the loan. CNB filed a financing statement with the Kansas secretary of state using the correct name of the debtor, “Rodger House.” Several years later, while still owing money to Pankratz and CNB, House filed for bankruptcy. Pankratz filed a lawsuit in Kansas trial court to recover the tractor. CNB challenged the claim, alleging that it should be  permitted to recover the tractor. The trial court found that Pankratz’s misspelling of the debtor’s first name on its financing statement was a minor error and granted summary judgment to Pankratz. The court of appeals held that Pankratz’s misspelling of House’s first name was seriously misleading and held in favor of CNB. Pankratz appealed. 

Issue: Is Pankratz’s filing of the financing statement under the wrong first name of the debtor seriously misleading? 

Language of the Court: Because the primary purpose of a financing statement is to provide notice to third parties that the creditor has an interest in the debtor’s property and the financing statements are indexed under the debtor’s name, it is particularly important to require exactness in the name used, the debtor’s legal name. We conclude that Pankratz’ filed financing statement was “seriously misleading.” 

Decision: The Supreme Court of Kansas held that the misspelling of the debtor’s name misled creditors and was therefore ineffectual in giving CNB notice of Pankratz’s security interest in the tractor. The supreme court affirmed the court of appeals judgment in CNB’s favor. 

Ethics Questions: Did either party act unethically in this case? Or was this a legitimate legal dispute?