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)
The department shall prescribe by rule standard forms for filing a financing statement, continuation statement, termination statement, statement of assignment or statement of release. A filing officer may refuse to accept statements not on the required form or not containing information required under sub. (1)
A financing statement may be amended by filing a writing signed by both the debtor and the secured party. An amendment which changes only the name or the address of either party need be signed only by the secured party. An amendment does not extend the period of effectiveness of a financing statement. If any amendment adds collateral, it is effective as to the added collateral only from the filing date of the amendment. In this chapter, unless the context otherwise requires, the term "financing statement" means the original financing statement and any amendments.
A financing statement covering timber to be cut or covering minerals or the like (including oil and gas) or accounts subject to s. 409.103 (5)
, or a financing statement filed as a fixture filing (s. 409.313
) where the debtor is not a transmitting utility, must show that it covers this type of collateral, must recite that it is to be filed in the real estate records, and the financing statement must contain a legal description of the real estate.
A mortgage is effective as a financing statement filed as a fixture filing from the date of its recording if all of the following conditions are met:
The goods are described in the mortgage by item or type.
The goods are or are to become fixtures related to the real estate described in the mortgage.
The mortgage complies with the requirements for a financing statement in this section other than a recital that it is to be filed in the real estate records.
No fee with reference to the financing statement is required other than the regular recording and satisfaction fees with respect to the mortgage.
A financing statement sufficiently shows the name of the debtor if it gives the individual, partnership, limited liability company or corporate name of the debtor, whether or not it adds other trade names or the names of partners. Where the debtor so changes the debtor's name or in the case of an organization its name, identity or corporate structure that a filed financing statement becomes seriously misleading, the filing is not effective to perfect a security interest in collateral acquired by the debtor more than 4 months after the change, unless a new appropriate financing statement is filed before the expiration of that time. A filed financing statement remains effective with respect to collateral transferred by the debtor even though the secured party knows of or consents to the transfer.
A financing statement substantially complying with the requirements of this section is effective even though it contains minor errors which are not seriously misleading.
A financing statement signed by one spouse is signed by the debtor under this section if that spouse acting alone has the right under s. 766.51
to manage and control the collateral, unless a marital property agreement or court decree which is binding on the secured party under s. 766.55 (4m)
or 766.56 (2) (c)
Legislative Council Note, 1973: The present requirement in sub. (1) (b) that a financing statement covering crops growing or to be grown must contain the legal description and name of the record owner of the real estate concerned is not a part of the official text of the code. This special Wisconsin requirement was rejected by the Special Committee because financing statements covering growing crops and crops to be grown are to be filed with the register of deeds in the county where the land is located [s. 409.401 (1) (a)] but not in the real estate records. Accidental filing in the real estate records may cause problems. In addition, the name of the record owner is misleading if the crops are being grown by a debtor who is a tenant farmer. The Special Committee decided not to adopt the additional language of the official text relating to use of reproductions of the security agreement or financing statement for filing purposes. The Committee transferred the language presently contained in the last sentence of s. 409.403 (1) to the last sentence of par. (b).
Changes in various provisions of the official text make it unnecessary in certain instances to have both the signature of the debtor and the secured party on the financing statement or a copy of the security agreement. The Special Committee is of the opinion that it is not the responsibility of a filing officer to determine whether or not one or 2 signatures are necessary or if only one, which one.
For an explanation of the change in sub. (3) 2., see NOTE to s. 409.402 (1) (b). The Special Committee also deleted the following language at the end of sub. (3) 3: "(If the debtor does not have an interest of record) The name of the record owner is ....". This change was made to conform to the change in s. 409.313 (4) (a) and (b). See the note to those paragraphs. A similar deletion is made in s. 409.402 (5). For the purposes of clarification, except in s. 409.402 (1) (b), the Special Committee decided that where a description of real estate is required, what is meant is a "legal" description. This clarification has been made throughout the bill.
The Special Committee added the language concerning amendments which change only the name or address of the parties. The Special Committee is of the opinion that only the secured party could be affected adversely by a name or address change and that the requirement of signatures of both parties is unnecessary.
Language was deleted in new sub. (5). See note to s. 409.402 (3) 3. With respect to the requirement in s. 409.402 (5) that certain financing statements must specify that they are to be filed in the real estate records, the Special Committee rejected additional language which would have provided that, "failure to indicate on the financing statement that proper filing is in the real estate records does not invalidate a financing statement that otherwise complies with the law." The Special Committee was of the opinion that such a notation on a financing statement serves only as an instruction to the filing officer and that the failure to include this instruction would be only a minor error which is not seriously misleading as long as the financing statement is, in fact, properly filed. In reaching this conclusion, the Special Committee took cognizance of s. 409.402 (8) [present sub. (5)] which provides that minor errors, which are not seriously misleading, do not jeopardize the effectiveness of financing statements. (Bill 177-S)
A creditor's filing statement became "seriously misleading" under sub. (7) after the debtors' name change and so was insufficient to perfect a security interest in property acquired more than 4 months after the name change. First Agri Services, Inc. v. Kahl, 129 Wis. 2d 464
, 385 N.W.2d 191
(Ct. App. 1986).
A wrong statement of section, township, range and county where crops were grown was not minor, and, without directing further inquiry, was insufficient. Whether a party is misled by the description is not part of the inquiry under s. 409.110 or 409.402. Smith & Spindahl Enterprises, Inc. v. Lee, 206 Wis. 2d 662
, 557 N.W.2d 865
(Ct. App. 1996).
Address as a formal requisite of the financing statement. Neimann, 55 MLR 387.
What constitutes filing; duration of filing; effect of lapsed filing; duties of filing officer. 409.403(1)
Presentation for filing of a financing statement and tender of the filing fee constitutes filing under this chapter unless the filing officer refuses to accept the statement under s. 409.402 (3m)
. Presentation for filing of a financing statement and acceptance of the statement by the filing officer constitutes filing under this chapter.
Except as provided in sub. (6)
a filed financing statement is effective for a period of 5 years from the date of filing. The effectiveness of a filed financing statement lapses on the expiration of the 5-year period unless a continuation statement is filed prior to the lapse. If a security interest perfected by filing exists at the time insolvency proceedings are commenced by or against the debtor, the security interest remains perfected until termination of the insolvency proceedings and thereafter for a period of 60 days or until expiration of the 5-year period, whichever occurs later. Upon lapse the security interest becomes unperfected, unless it is perfected without filing. If the security interest becomes unperfected upon lapse, it is deemed to have been unperfected as against a person who became a purchaser or lien creditor before lapse.
A continuation statement may be filed by the secured party within 6 months prior to the expiration of the 5-year period specified in sub. (2)
. Any such continuation statement must be signed by the secured party, identify the original statement by file number and state that the original statement is still effective. A continuation statement signed by a person other than the secured party of record must be accompanied by a separate written statement of assignment signed by the secured party of record and complying with s. 409.405 (2)
, including payment of the required fee. Upon timely filing of the continuation statement, the effectiveness of the original statement is continued for 5 years after the last date to which the filing was effective whereupon it lapses in the same manner as provided in sub. (2)
unless another continuation statement is filed prior to such lapse. Succeeding continuation statements may be filed in the same manner to continue the effectiveness of the original statement. Unless a statute on disposition of public records provides otherwise, the filing officer may remove a lapsed statement from the files and destroy it immediately if the officer has retained a microfilm or other photographic record or an optical disk or electronic copy. In other cases a lapsed statement may not be destroyed until after one year after the lapse. The filing officer shall so arrange matters by physical annexation of financing statements to continuation statements or other related filings, or by other means, that if the officer physically destroys the financing statements of a period more than 5 years past, those which have been continued by a continuation statement or which are still effective under sub. (6)
shall be retained.
Except as provided in sub. (7)
, a filing officer shall mark each statement with a file number and with the date and hour of filing and shall hold the statement or a microfilm or other photographic copy thereof, or an optical disk or electronic copy thereof, for public inspection. In addition the filing officer shall index the statements according to the name of the debtor and shall note in the index the file number and the address of the debtor given in the statement.