So long as conflicting security interests are unperfected, the first to attach has priority.
For the purposes of sub. (5)
a date of filing or perfection as to collateral is also a date of filing or perfection as to proceeds.
If future advances are made while a security interest is perfected by filing, the taking of possession, or under s. 409.115
on investment property, the security interest has the same priority for the purposes of sub. (5)
or s. 409.115 (5)
with respect to the future advances as it does with respect to the first advance. If a commitment is made before or while the security interest is so perfected, the security interest has the same priority with respect to advances made pursuant thereto. In other cases a perfected security interest has priority from the date the advance is made.
A seller of goods on credit must perfect its claim to priority, under this section, by filing the agreement and financing statements as required by this section. House of Stainless, Inc. v. Marshall & Ilsley Bank, 75 Wis. 2d 264
, 249 N.W.2d 561
Equipment financing and the lease paradox of article 9. Tuthill, WBB October 1981.
Priority of security interests in fixtures. 409.313(1)
In this section and in the provisions of ss. 409.401
referring to fixture filing, unless the context otherwise requires:
A mortgage is a "construction mortgage" to the extent that it secures an obligation incurred for the construction of an improvement on land including the acquisition cost of the land, if the recorded writing so indicates.
A "fixture filing" is the filing in the office where a mortgage on the real estate would be filed or recorded of a financing statement covering goods which are or are to become fixtures and conforming to the requirements of s. 409.402 (5)
Goods are "fixtures" when they become so related to particular real estate that an interest in them arises under real estate law.
A security interest under this chapter may be created in goods which are fixtures or may continue in goods which become fixtures, but no security interest exists under this chapter in ordinary building materials incorporated into an improvement on land.
This chapter does not prevent creation of an encumbrance upon fixtures pursuant to real estate law.
A perfected security interest in fixtures has priority over the conflicting interest of an encumbrancer or owner of the real estate where:
The security interest is a purchase money security interest, the interest of the encumbrancer or owner arises before the goods become fixtures, the security interest is perfected by a fixture filing before the goods become fixtures or within 10 days thereafter, and the debtor has an interest of record in the real estate; or
The security interest is perfected by a fixture filing before the interest of the encumbrancer or owner is of record, the security interest has priority over any conflicting interest of a predecessor in title of the encumbrancer or owner, and the debtor has an interest of record in the real estate; or
The fixtures are readily removable factory or office machines or readily removable replacements of domestic appliances which are consumer goods, and before the goods become fixtures the security interest is perfected by any method permitted by this chapter;
The conflicting interest is a lien on the real estate obtained by legal or equitable proceedings after the security interest was perfected by any method permitted by this chapter; or
The security interest is created by a master lease entered into by the state under s. 16.76 (4)
, the security interest is perfected under s. 16.76 (4) (e)
before the interest of the encumbrancer or owner is of record, the security interest has priority over any conflicting interest of a predecessor in title of the encumbrancer or owner and the debtor has an interest of record in the real estate.
A security interest in fixtures, whether or not perfected, has priority over the conflicting interest of an encumbrancer or owner of the real estate where:
The encumbrancer or owner has consented in writing to the security interest or has disclaimed an interest in the goods as fixtures; or
The debtor has a right to remove the goods as against the encumbrancer or owner. If the debtor's right terminates, the priority of the security interest continues for a reasonable time.
Notwithstanding sub. (4) (a)
but otherwise subject to subs. (4)
, a security interest in fixtures is subordinate to a construction mortgage recorded before the goods become fixtures if the goods become fixtures before the completion of the construction. To the extent that it is given to refinance a construction mortgage, a mortgage has this priority to the same extent as the construction mortgage.
In cases not within the preceding subsections, a security interest in fixtures is subordinate to the conflicting interest of an encumbrancer or owner of the related real estate who is not the debtor.
When the secured party has priority over all owners and encumbrancers of the real estate, the secured party may, on default, subject to ss. 409.501
remove the secured party's collateral from the real estate but the secured party must reimburse any encumbrancer or owner of the real estate who is not the debtor and who has not otherwise agreed for the cost of repair of any physical injury, but not for any diminution in value of the real estate caused by the absence of the goods removed or by any necessity for replacing them. A person entitled to reimbursement may refuse permission to remove until the secured party gives adequate security for the performance of this obligation.
The priority provisions of this section do not apply to security interests in vehicles for which certificates of title are required under ch. 342
and which are subject to s. 409.302 (3) (b)
Legislative Council Note, 1973: Sub. (9) is not contained in the official text. It was added by the Special Committee to make it clear that vehicles perfected by filing under the motor vehicle title statutes, including mobile homes, are not subject to fixture filing regardless of how they may be attached to the land; therefore, the rules of priority set out in this section do not apply. (Bill 177-S)
A security interest in goods which attaches before they are installed in or affixed to other goods takes priority as to the goods installed or affixed (called in this section "accessions") over the claims of all persons to the whole except as stated in sub. (3)
and subject to s. 409.315 (1)
A security interest which attaches to goods after they become part of a whole is valid against all persons subsequently acquiring interests in the whole except as stated in sub. (3)
but is invalid against any person with an interest in the whole at the time the security interest attaches to the goods who has not in writing consented to the security interest or disclaimed an interest in the goods as part of the whole.
If the subsequent purchase is made, the lien by judicial proceedings obtained or the subsequent advance under the prior perfected security interest is made or contracted for without knowledge of the security interest and before it is perfected, the security interests described in subs. (1)
do not take priority over:
A subsequent purchaser for value of any interest in the whole; or
A creditor with a lien on the whole subsequently obtained by judicial proceedings; or
A creditor with a prior perfected security interest in the whole to the extent that the creditor makes subsequent advances.
A purchaser of the whole at a foreclosure sale other than the holder of a perfected security interest purchasing at that holder's own foreclosure sale is a subsequent purchaser within this section.
When under subs. (1)
a secured party has an interest in accessions which has priority over the claims of all persons who have interests in the whole, the secured party may on default subject to ss. 409.501
remove the secured party's collateral from the whole but the secured party must reimburse any encumbrancer or owner of the whole who is not the debtor and who has not otherwise agreed for the cost of repair of any physical injury but not for any diminution in value of the whole caused by the absence of the goods removed or by any necessity for replacing them. A person entitled to reimbursement may refuse permission to remove until the security party gives adequate security for the performance of this obligation.
History: 1991 a. 316
Priority when goods are commingled or processed. 409.315(1)(1)
If a security interest in goods was perfected and subsequently the goods or a part thereof have become part of a product or mass, the security interest continues in the product or mass if:
The goods are so manufactured, processed, assembled or commingled that their identity is lost in the product or mass; or
A financing statement covering the original goods also covers the product into which the goods have been manufactured, processed or assembled.
In a case to which sub. (1) (b)
applies, no separate security interest in that part of the original goods which has been manufactured, processed or assembled into the product may be claimed under s. 409.314
When under sub. (1)
more than one security interest attaches to the product or mass, they rank equally according to the ratio that the cost of the goods to which each interest originally attached bears to the cost of the total product or mass.
Priority subject to subordination.
Nothing in this chapter prevents subordination by agreement by any person entitled to priority.
Secured party not obligated on contract of debtor.
The mere existence of a security interest or authority given to the debtor to dispose of or use collateral does not impose contract or tort liability upon the secured party for the debtor's acts or omissions.
Defenses against assignee; modification of contract after notification of assignment; term prohibiting assignment ineffective; identification and proof of assignment. 409.318(1)(1)
Unless an account debtor has made an enforceable agreement not to assert defenses or claims arising out of a sale as provided in s. 409.206
the rights of an assignee are subject to:
All the terms of the contract between the account debtor and assignor and any defense or claim arising therefrom; and
Any other defense or claim of the account debtor against the assignor which accrues before the account debtor receives notification of the assignment.
So far as the right to payment or a part thereof under an assigned contract has not been fully earned by performance, and notwithstanding notification of the assignment, any modification of or substitution for the contract made in good faith and in accordance with reasonable commercial standards is effective against an assignee unless the account debtor has otherwise agreed but the assignee acquires corresponding rights under the modified or substituted contract. The assignment may provide that such modification or substitution is a breach by the assignor.
The account debtor is authorized to pay the assignor until the account debtor receives notification that the amount due or to become due has been assigned and that payment is to be made to the assignee. A notification which does not reasonably identify the rights assigned is ineffective. If requested by the account debtor, the assignee must seasonably furnish reasonable proof that the assignment has been made and unless the assignee does so the account debtor may pay the assignor.
A term in any contract between an account debtor and an assignor is ineffective if it prohibits assignment of an account or prohibits creation of a security interest in a general intangible for money due or to become due or requires the account debtor's consent to such assignment or security interest.
History: 1973 c. 215
; 1991 a. 316
There is no distinction between a party with a security interest in a debtor's accounts receivable and a party who is an assignee of a debtor's accounts receivable. Bank of Waunakee v. Rochester Cheese Sales, Inc. 906 F.2d 1185
Place of filing; erroneous filing; removal of collateral. 409.401(1)(1)
The proper place to file in order to perfect a security interest is as follows:
When the collateral is equipment used in farming operations, or farm products, or accounts or general intangibles arising from or relating to the sale of farm products by a farmer, or consumer goods, then in the office of the register of deeds in the county of the debtor's residence or if the debtor is not a resident of this state then in the office of the register of deeds in the county where the goods are kept, and in addition when the collateral is crops growing or to be grown in the office of the register of deeds in the county where the land is located;
When the collateral is timber to be cut or is minerals or the like (including oil and gas) or accounts subject to s. 409.103 (5)
, or when the financing statement is filed as a fixture filing (s. 409.313
) and the collateral is goods which are or are to become fixtures, then in the office where a mortgage on the real estate would be filed or recorded;
A filing which is made in good faith in an improper place or not in all of the places required by this section is nevertheless effective with regard to any collateral as to which the filing complied with the requirements of this chapter and is also effective with regard to collateral covered by the financing statement against any person who has knowledge of the contents of such financing statement.
A filing which is made in the proper place in this state continues effective even though the debtor's residence or place of business or the location of the collateral or its use, whichever controlled the original filing, is thereafter changed.
The rules stated in s. 409.103
determine whether filing is necessary in this state.
Notwithstanding the preceding subsections, and subject to s. 409.302 (3)
, the proper place to file in order to perfect a security interest in collateral, including fixtures, of a transmitting utility is with the department. This filing constitutes a fixture filing under s. 409.313
as to the collateral described therein which is or is to become fixtures.
For the purposes of this section, the residence of an organization is its place of business if it has one or its chief executive office if it has more than one place of business.
See s. 779.97
for filing federal liens.
Formal requisites of financing statement; amendments; mortgage as financing statement. 409.402(1)(a)(a)
A financing statement is sufficient if it gives the names of the debtor and the secured party, is signed by the debtor, gives an address of the secured party from which information concerning the security interest may be obtained, gives a mailing address of the debtor and contains a statement indicating the types, or describing the items, of collateral. A financing statement may be filed before a security agreement is made or a security interest otherwise attaches.
When the financing statement covers timber to be cut or covers minerals or the like (including oil and gas) or accounts subject to s. 409.103 (5)
, or when the financing statement is filed as a fixture filing (s. 409.313
) and the collateral is goods which are or are to become fixtures, the statement must also comply with sub. (5)
. In each county, the register of deeds shall enter evidence of financing statements covering fixtures on all indices kept by the register of deeds regarding the transfer of real estate. A copy of the security agreement is sufficient as a financing statement if it contains the above information and is signed by the debtor. An accurate reproduction of the security agreement or the financing statement, certified to be a true copy by the secured party, public officer or notary public, or a carbon copy bearing signatures appearing by carbon impression, may be filed.
A financing statement which otherwise complies with sub. (1)
is sufficient when it is signed by the secured party instead of the debtor if it is filed to perfect a security interest in:
Collateral already subject to a security interest in another jurisdiction when it is brought into this state or when the debtor's location is changed to this state. Such a financing statement must state that the collateral was brought into this state or that the debtor's location was changed to this state under such circumstances; or
Proceeds under s. 409.306
if the security interest in the original collateral was perfected. Such a financing statement must describe the original collateral; or
Collateral as to which the filing has lapsed; or
Collateral acquired after a change of name, identity or corporate structure of the debtor (sub. (7)
A form substantially as follows is sufficient to comply with sub. (1)
Name of debtor (or assignor)
Name of secured party (or assignee)
This financing statement covers the following types (or items) of property:
2. The above goods are to become fixtures on (Legal Description of Real Estate) .... and this financing statement is to be filed in the real estate records.
3. (If products of collateral are claimed) Products of the collateral are also covered.
Signature of Debtor (or Assignor) ....
Signature of Secured Party (or Assignee) ....
(use whichever is applicable)