Wisconsin Legislature: 10,78

(3) The rights of the secured party after default by the debtor are governed by ch. 402 or 411; and

(4) The security interest has priority over a conflicting security interest created by the debtor.

Subchapter II
EFFECTIVENESS OF SECURITY
AGREEMENT; ATTACHMENT OF
SECURITY INTEREST; RIGHTS OF
PARTIES TO SECURITY AGREEMENT

409.201 General effectiveness of security agreement. (1) General effectiveness. Except as otherwise provided in chs. 401 to 411, a security agreement is effective according to its terms between the parties, against purchasers of the collateral, and against creditors.

(2) Applicable consumer laws and other law. A transaction subject to this chapter is subject to any applicable rule of law which establishes a different rule for consumers and to chs. 138, 421 to 427, and 429 and s. 182.025.

(3) Other applicable law controls. In case of conflict between this chapter and a rule of law, statute, or rule described in sub. (2), the rule of law, statute, or rule controls. Failure to comply with a statute or rule described in sub. (2) has only the effect the statute or rule specifies.

(4) Further deference to other applicable law. This chapter does not:

(a) Validate any rate, charge, agreement, or practice that violates a rule of law, statute, or rule described in sub. (2); or

(b) Extend the application of the rule of law, statute, or rule to a transaction not otherwise subject to the rule of law, statute, or rule.

409.202 Title to collateral immaterial. Except as otherwise provided with respect to consignments or sales of accounts, chattel paper, payment intangibles, or promissory notes, the provisions of this chapter with regard to rights and obligations apply whether title to collateral is in the secured party or the debtor.

409.203 Attachment and enforceability of security interest; proceeds; supporting obligations; formal requisites. (1) Attachment. A security interest attaches to collateral when it becomes enforceable against the debtor with respect to the collateral, unless an agreement expressly postpones the time of attachment.

(2) Enforceability. Except as otherwise provided in subs. (3) to (9), a security interest is enforceable against the debtor and 3rd parties with respect to the collateral only if:

(a) Value has been given;

(b) The debtor has rights in the collateral or the power to transfer rights in the collateral to a secured party; and

1. The debtor has authenticated a security agreement that provides a description of the collateral and, if the security interest covers timber to be cut, a description of the land concerned;

2. The collateral is not a certificated security and is in the possession of the secured party under s. 409.313 pursuant to the debtor's security agreement;

3. The collateral is a certificated security in registered form and the security certificate has been delivered to the secured party under s. 408.301 pursuant to the debtor's security agreement; or

4. The collateral is deposit accounts, electronic chattel paper, investment property, or letter-of-credit rights, and the secured party has control under s. 409.104, 409.105, 409.106, or 409.107 pursuant to the debtor's security agreement.

(3) Other uniform commercial code provisions. Subsection (2) is subject to s. 404.210 on the security interest of a collecting bank, s. 405.118 on the security interest of a letter-of-credit issuer or nominated person, s. 409.110 on a security interest arising under ch. 402 or 411, and s. 409.206 on security interests in investment property.

(4) When person becomes bound by another person's security agreement. (a) A person becomes bound as debtor by a security agreement entered into by another person if, by operation of law other than this chapter or by contract:

1. The security agreement becomes effective to create a security interest in the person's property; or

2. The person becomes generally obligated for the obligations of the other person, including the obligation secured under the security agreement, and acquires or succeeds to all or substantially all of the assets of the other person.

(b) A security agreement authenticated by one spouse is authenticated 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 that is binding on the secured party under s. 766.55 (4m) or 766.56 (2) (c) provides otherwise.

(5) Effect of new debtor becoming bound. If a new debtor becomes bound as debtor by a security agreement entered into by another person:

(a) The agreement satisfies sub. (2) (c) with respect to existing or after-acquired property of the new debtor to the extent that the property is described in the agreement; and

(b) Another agreement is not necessary to make a security interest in the property enforceable.

(6) Proceeds and supporting obligations. The attachment of a security interest in collateral gives the secured party the rights to proceeds provided by s. 409.315 and is also attachment of a security interest in a supporting obligation for the collateral.

(7) Lien securing right to payment. The attachment of a security interest in a right to payment or performance secured by a security interest or other lien on personal or real property is also attachment of a security interest in the security interest, mortgage, or other lien.

(8) Security entitlement carried in securities account. The attachment of a security interest in a securities account is also attachment of a security interest in the security entitlements carried in the securities account.

(9) Commodity contracts carried in commodity account. The attachment of a security interest in a commodity account is also attachment of a security interest in the commodity contracts carried in the commodity account.

409.204 After-acquired property; future advances. (1) After-acquired collateral. Except as otherwise provided in sub. (2), a security agreement may create or provide for a security interest in after-acquired collateral.

(2) When after-acquired property clause not effective. A security interest does not attach under a term constituting an after-acquired property clause to:

(a) Consumer goods, other than an accession when given as additional security, unless the debtor acquires rights in them within 10 days after the secured party gives value; or

(b) A commercial tort claim.

(3) Future advances and other value. A security agreement may provide that collateral secures, or that accounts, chattel paper, payment intangibles, or promissory notes are sold in connection with, future advances or other value, whether or not the advances or value are given pursuant to commitment.

409.205 Use or disposition of collateral permissible. (1) When security interest not invalid or fraudulent. A security interest is not invalid or fraudulent against creditors solely because:

(a) The debtor has the right or ability to:

1. Use, commingle, or dispose of all or part of the collateral, including returned or repossessed goods;

2. Collect, compromise, enforce, or otherwise deal with collateral;

3. Accept the return of collateral or make repossessions; or

4. Use, commingle, or dispose of proceeds; or

(b) The secured party fails to require the debtor to account for proceeds or replace collateral.

(2) Requirements of possession not relaxed. This section does not relax the requirements of possession if attachment, perfection, or enforcement of a security interest depends upon possession of the collateral by the secured party.

409.206 Security interest arising in purchase or delivery of financial asset. (1) Security interest when person buys through securities intermediary. A security interest in favor of a securities intermediary attaches to a person's security entitlement if:

(a) The person buys a financial asset through the securities intermediary in a transaction in which the person is obligated to pay the purchase price to the securities intermediary at the time of the purchase; and

(b) The securities intermediary credits the financial asset to the buyer's securities account before the buyer pays the securities intermediary.

(2) Security interest secures obligation to pay for financial asset. The security interest described in sub. (1) secures the person's obligation to pay for the financial asset.

(3) Security interest in payment against delivery transaction. A security interest in favor of a person that delivers a certificated security or other financial asset represented by a writing attaches to the security or other financial asset if:

(a) The security or other financial asset:

1. In the ordinary course of business is transferred by delivery with any necessary endorsement or assignment; and

2. Is delivered under an agreement between persons in the business of dealing with such securities or financial assets; and

(b) The agreement calls for delivery against payment.

(4) Security interest secures obligation to pay for delivery. The security interest described in sub. (3) secures the obligation to make payment for the delivery.

409.207 Rights and duties of secured party having possession or control of collateral. (1) Duty of care when secured party in possession. Except as otherwise provided in sub. (4), a secured party shall use reasonable care in the custody and preservation of collateral in the secured party's possession. In the case of chattel paper or an instrument, reasonable care includes taking necessary steps to preserve rights against prior parties unless otherwise agreed.

(2) Expenses, risks, duties, and rights when secured party in possession. Except as otherwise provided in sub. (4), if a secured party has possession of collateral:

(a) Reasonable expenses, including the cost of insurance and payment of taxes or other charges, incurred in the custody, preservation, use, or operation of the collateral are chargeable to the debtor and are secured by the collateral;

(b) The risk of accidental loss or damage is on the debtor to the extent of a deficiency in any effective insurance coverage;

(d) The secured party may use or operate the collateral:

1. For the purpose of preserving the collateral or its value;

2. As permitted by an order of a court having competent jurisdiction; or

3. Except in the case of consumer goods, in the manner and to the extent agreed by the debtor.

(3) Duties and rights when secured party in possession or control. Except as otherwise provided in sub. (4), a secured party having possession of collateral or control of collateral under s. 409.104, 409.105, 409.106, or 409.107:

(a) May hold as additional security any proceeds, except money or funds, received from the collateral;

(b) Shall apply money or funds received from the collateral to reduce the secured obligation, unless remitted to the debtor; and

(4) Buyer of certain rights to payment. If the secured party is a buyer of accounts, chattel paper, payment intangibles, or promissory notes or a consignor:

(a) Subsection (1) does not apply unless the secured party is entitled under an agreement:

1. To charge back uncollected collateral; or

2. Otherwise to full or limited recourse against the debtor or a secondary obligor based on the nonpayment or other default of an account debtor or other obligor on the collateral; and

(b) Subsections (1) and (2) do not apply.

409.208 Additional duties of secured party having control of collateral. (1) Applicability of section. This section applies to cases in which there is no outstanding secured obligation and the secured party is not committed to make advances, incur obligations, or otherwise give value.

(2) Duties of secured party after receiving demand from debtor. Within 10 days after receiving an authenticated demand by the debtor:

(a) A secured party having control of a deposit account under s. 409.104 (1) (b) shall send to the bank with which the deposit account is maintained an authenticated statement that releases the bank from any further obligation to comply with instructions originated by the secured party;

(b) A secured party having control of a deposit account under s. 409.104 (1) (c) shall:

1. Pay the debtor the balance on deposit in the deposit account; or

2. Transfer the balance on deposit into a deposit account in the debtor's name;

1. Communicate the authoritative copy of the electronic chattel paper to the debtor or its designated custodian;

2. If the debtor designates a custodian that is the designated custodian with which the authoritative copy of the electronic chattel paper is maintained for the secured party, communicate to the custodian an authenticated record releasing the designated custodian from any further obligation to comply with instructions originated by the secured party and instructing the custodian to comply with instructions originated by the debtor; and

3. Take appropriate action to enable the debtor or its designated custodian to make copies of or revisions to the authoritative copy which add or change an identified assignee of the authoritative copy without the consent of the secured party;

(d) A secured party having control of investment property under s. 408.106 (4) (b) or 409.106 (2) shall send to the securities intermediary or commodity intermediary with which the security entitlement or commodity contract is maintained an authenticated record that releases the securities intermediary or commodity intermediary from any further obligation to comply with entitlement orders or directions originated by the secured party; and

(e) A secured party having control of a letter-of-credit right under s. 409.107 shall send to each person having an unfulfilled obligation to pay or deliver proceeds of the letter of credit to the secured party an authenticated release from any further obligation to pay or deliver proceeds of the letter of credit to the secured party.

409.209 Duties of secured party if account debtor has been notified of assignment. (1) Applicability of section. Except as otherwise provided in sub. (3), this section applies if:

(a) There is no outstanding secured obligation; and

(b) The secured party is not committed to make advances, incur obligations, or otherwise give value.

(2) Duties of secured party after receiving demand from debtor. Within 10 days after receiving an authenticated demand by the debtor, a secured party shall send to an account debtor that has received notification of an assignment to the secured party as assignee under s. 409.406 (1) an authenticated record that releases the account debtor from any further obligation to the secured party.

(3) Inapplicability to sales. This section does not apply to an assignment constituting the sale of an account, chattel paper, or payment intangible.