AB481,35,6 3(2) Subject to s. 407.503, title and rights acquired by due negotiation are not
4defeated by any stoppage of the goods represented by the document of title or by
5surrender of the goods by the bailee and are not impaired even if any of the following
6apply:
AB481,35,87 (a) The due negotiation or any prior due negotiation constituted a breach of
8duty.
AB481,35,119 (b) Any person has been deprived of possession of a negotiable tangible
10document or control of a negotiable electronic document by misrepresentation, fraud,
11accident, mistake, duress, loss, theft, or conversion.
AB481,35,1312 (c) A previous sale or other transfer of the goods or document has been made
13to a 3rd person.
AB481,35,17 14407.503 Document of title to goods defeated in certain cases. (1) A
15document of title confers no right in goods against a person that before issuance of
16the document had a legal interest or a perfected security interest in the goods and
17that did not do any of the following:
AB481,35,2118 (a) Deliver or entrust the goods or any document covering the goods to the bailor
19or the bailor's nominee with actual or apparent authority to ship, store, or sell; with
20power to obtain delivery under s. 407.403; or with power of disposition under s.
21402.403, 409.320, 411.304 (2), or 411.305 (2), or other statute or rule of law.
AB481,35,2222 (b) Acquiesce in the procurement by the bailor or its nominee of any document.
AB481,36,2 23(2) Title to goods based upon an unaccepted delivery order is subject to the
24rights of any person to which a negotiable warehouse receipt or bill of lading covering

1the goods has been duly negotiated. That title may be defeated under s. 407.504 to
2the same extent as the rights of the issuer or a transferee from the issuer.
AB481,36,6 3(3) Title to goods based upon a bill of lading issued to a freight forwarder is
4subject to the rights of any person to which a bill issued by the freight forwarder is
5duly negotiated. However, delivery by the carrier in accordance with subch. IV
6pursuant to its own bill of lading discharges the carrier's obligation to deliver.
AB481,36,11 7407.504 Rights acquired in absence of due negotiation; effect of
8diversion; stoppage of delivery. (1)
A transferee of a document of title, whether
9negotiable or nonnegotiable, to which the document has been delivered but not duly
10negotiated, acquires the title and rights that its transferor had or had actual
11authority to convey.
AB481,36,14 12(2) In the case of a nonnegotiable document of title, until but not after the bailee
13receives notice of the transfer, the rights of the transferee may be defeated by any of
14the following:
AB481,36,1615 (a) Those creditors of the transferor that could treat the transfer as void under
16s. 402.402 or 411.308.
AB481,36,1817 (b) A buyer from the transferor in ordinary course of business if the bailee has
18delivered the goods to the buyer or received notification of the buyer's rights.
AB481,36,2019 (c) A lessee from the transferor in ordinary course of business if the bailee has
20delivered the goods to the lessee or received notification of the lessee's rights.
AB481,36,2121 (d) As against the bailee, by good faith dealings of the bailee with the transferor.
AB481,37,2 22(3) A diversion or other change of shipping instructions by the consignor in a
23nonnegotiable bill of lading which causes the bailee not to deliver the goods to the
24consignee defeats the consignee's title to the goods if the goods have been delivered

1to a buyer in ordinary course of business or a lessee in ordinary course of business
2and in any event defeats the consignee's rights against the bailee.
AB481,37,7 3(4) Delivery of the goods pursuant to a nonnegotiable document of title may be
4stopped by a seller under s. 402.705 or a lessor under s. 411.526, subject to the
5requirements of due notification in those sections. A bailee honoring the seller's or
6lessor's instructions is entitled to be indemnified by the seller or lessor against any
7resulting loss or expense.
AB481,37,10 8407.505 Endorser not guarantor for other parties. The endorsement of
9a tangible document of title issued by a bailee does not make the endorser liable for
10any default by the bailee or previous endorsers.
AB481,37,14 11407.506 Delivery without endorsement; right to compel endorsement.
12The transferee of a negotiable tangible document of title has a specifically
13enforceable right to have its transferor supply any necessary endorsement, but the
14transfer becomes a negotiation only as of the time the endorsement is supplied.
AB481,37,19 15407.507 Warranties on negotiation or delivery of document of title. If
16a person negotiates or delivers a document of title for value, otherwise than as a mere
17intermediary under s. 407.508, unless otherwise agreed, the transferor warrants to
18its immediate purchaser only in addition to any warranty made in selling or leasing
19the goods that all of the following apply:
AB481,37,20 20(1) The document is genuine.
AB481,37,22 21(2) The transferor does not have knowledge of any fact that would impair the
22document's validity or worth.
AB481,37,24 23(3) The negotiation or delivery is rightful and fully effective with respect to the
24title to the document and the goods it represents.
AB481,38,6
1407.508 Warranties of collecting bank as to documents of title. A
2collecting bank or other intermediary known to be entrusted with documents of title
3on behalf of another or with collection of a draft or other claim against delivery of
4documents warrants by the delivery of the documents only its own good faith and
5authority even if the collecting bank or other intermediary has purchased or made
6advances against the claim or draft to be collected.
AB481,38,9 7407.509 Adequate compliance with commercial contract. Whether a
8document of title is adequate to fulfill the obligations of a contract for sale, a contract
9for lease, or the conditions of a letter of credit is determined by ch. 402, 405, or 411.
AB481,38,1010 Subchapter VI
AB481,38,1211 warehouse receipts and bills of
12 lading: Miscellaneous provisions
AB481,38,22 13407.601 Lost, stolen, or destroyed documents of title. (1) If a document
14of title is lost, stolen, or destroyed, a court may order delivery of the goods or issuance
15of a substitute document and the bailee may without liability to any person comply
16with the order. If the document was negotiable, a court may not order delivery of the
17goods or issuance of a substitute document without the claimant's posting security
18unless it finds that any person that may suffer loss as a result of nonsurrender of
19possession or control of the document is adequately protected against the loss. If the
20document was nonnegotiable, the court may require security. The court may also
21order payment of the bailee's reasonable costs and attorney fees in any action under
22this subsection.
AB481,39,3 23(2) A bailee that without court order delivers goods to a person claiming under
24a missing negotiable document of title is liable to any person injured thereby. If the
25delivery is not in good faith, the bailee is liable for conversion. Delivery in good faith

1is not conversion if the claimant posts security with the bailee in an amount at least
2double the value of the goods at the time of posting to indemnify any person injured
3by the delivery which files a notice of claim within one year after the delivery.
AB481,39,13 4407.602 Attachment of goods covered by negotiable document of title.
5Unless a document of title was originally issued upon delivery of the goods by a
6person that did not have power to dispose of them, a lien does not attach by virtue
7of any judicial process to goods in the possession of a bailee for which a negotiable
8document of title is outstanding unless possession or control of the document is first
9surrendered to the bailee or the document's negotiation is enjoined. The bailee may
10not be compelled to deliver the goods pursuant to process until possession or control
11of the document is surrendered to the bailee or to the court. A purchaser of the
12document for value without notice of the process or injunction takes free of the lien
13imposed by judicial process.
AB481,39,18 14407.603 Conflicting claims; interpleader. If more than one person claims
15title to or possession of the goods, the bailee is excused from delivery until the bailee
16has a reasonable time to ascertain the validity of the adverse claims or to commence
17an action for interpleader. The bailee may assert an interpleader either in defending
18an action for nondelivery of the goods or by original action.
AB481, s. 33 19Section 33. 408.103 (7) of the statutes is created to read:
AB481,39,2120 408.103 (7) A document of title, as defined in s. 401.201 (15), is not a financial
21asset unless s. 408.102 (1) (i) 1. c. applies.
AB481, s. 34 22Section 34. 409.102 (2) (df) of the statutes is created to read:
AB481,39,2323 409.102 (2) (df) "Control" (with respect to a document of title) — s. 407.106.
AB481, s. 35 24Section 35. 409.203 (2) (c) 4. of the statutes is amended to read:
AB481,40,4
1409.203 (2) (c) 4. The collateral is deposit accounts, electronic chattel paper,
2investment property, or letter-of-credit rights, or electronic documents, and the
3secured party has control under s. 407.106, 409.104, 409.105, 409.106, or 409.107
4pursuant to the debtor's security agreement.
AB481, s. 36 5Section 36. 409.207 (3) (intro.) of the statutes is amended to read:
AB481,40,96 409.207 (3) Duties and rights when secured party in possession or control.
7(intro.) Except as otherwise provided in sub. (4), a secured party having possession
8of collateral or control of collateral under s. 407.106, 409.104, 409.105, 409.106, or
9409.107:
AB481, s. 37 10Section 37. 409.208 (2) (d) of the statutes is amended to read:
AB481,40,1611 409.208 (2) (d) A secured party having control of investment property under
12s. 408.106 (4) (b) or 409.106 (2) shall send to the securities intermediary or
13commodity intermediary with which the security entitlement or commodity contract
14is maintained an authenticated record that releases the securities intermediary or
15commodity intermediary from any further obligation to comply with entitlement
16orders or directions originated by the secured party; and
AB481, s. 38 17Section 38. 409.208 (2) (e) of the statutes is amended to read:
AB481,40,2218 409.208 (2) (e) A secured party having control of a letter-of-credit right under
19s. 409.107 shall send to each person having an unfulfilled obligation to pay or deliver
20proceeds of the letter of credit to the secured party an authenticated release from any
21further obligation to pay or deliver proceeds of the letter of credit to the secured party.
22; and
AB481, s. 39 23Section 39. 409.208 (2) (f) of the statutes is created to read:
AB481,40,2524 409.208 (2) (f) A secured party having control of an electronic document shall
25do all of the following:
AB481,41,2
11. Give control of the electronic document to the debtor or its designated
2custodian.
AB481,41,83 2. If the debtor designates a custodian that is the designated custodian with
4which the authoritative copy of the electronic document is maintained for the
5secured party, communicate to the custodian an authenticated record releasing the
6designated custodian from any further obligation to comply with instructions
7originated by the secured party and instructing the custodian to comply with
8instructions originated by the debtor.
AB481,41,119 3. Take appropriate action to enable the debtor or its designated custodian to
10make copies of or revisions to the authoritative copy which add or change an
11identified assignee of the authoritative copy without the consent of the secured party.
AB481, s. 40 12Section 40. 409.301 (3) (intro.) of the statutes is amended to read:
AB481,41,1513 409.301 (3) Location of property. (intro.) Except as otherwise provided in sub.
14(4), while tangible negotiable documents, goods, instruments, money, or tangible
15chattel paper is located in a jurisdiction, the local law of that jurisdiction governs:
AB481, s. 41 16Section 41. 409.310 (2) (e) of the statutes is amended to read:
AB481,41,1917 409.310 (2) (e) In certificated securities, documents, goods, or instruments
18which is perfected without filing, control, or possession under s. 409.312 (5), (6), or
19(7);
AB481, s. 42 20Section 42. 409.310 (2) (h) of the statutes is amended to read:
AB481,41,2321 409.310 (2) (h) In deposit accounts, electronic chattel paper, electronic
22documents,
investment property, or letter-of-credit rights which is perfected by
23control under s. 409.314;
AB481, s. 43 24Section 43. 409.312 (5) of the statutes is amended to read:
AB481,42,5
1409.312 (5) Temporary perfection: new value. A security interest in
2certificated securities, negotiable documents, or instruments is perfected without
3filing or the taking of possession or control for a period of 20 days from the time it
4attaches to the extent that it arises for new value given under an authenticated
5security agreement.
AB481, s. 44 6Section 44. 409.313 (1) of the statutes is amended to read:
AB481,42,127 409.313 (1) Perfection by possession or delivery. Except as otherwise
8provided in sub. (2), a secured party may perfect a security interest in tangible
9negotiable documents, goods, instruments, money, or tangible chattel paper by
10taking possession of the collateral. A secured party may perfect a security interest
11in certificated securities by taking delivery of the certificated securities under s.
12408.301.
AB481, s. 45 13Section 45. 409.314 (1) of the statutes is amended to read:
AB481,42,1714 409.314 (1) Perfection by control. A security interest in investment property,
15deposit accounts, letter-of-credit rights, or electronic chattel paper, or electronic
16documents
may be perfected by control of the collateral under s. 407.106, 409.104,
17409.105, 409.106, or 409.107.
AB481, s. 46 18Section 46. 409.314 (2) of the statutes is amended to read:
AB481,42,2419 409.314 (2) Specified collateral: time of perfection by control;
20continuation of perfection.
A security interest in deposit accounts, electronic
21chattel paper, or letter-of-credit rights, or electronic documents is perfected by
22control under s. 407.106, 409.104, 409.105, or 409.107 when the secured party
23obtains control and remains perfected by control only while the secured party retains
24control.
AB481, s. 47 25Section 47. 409.317 (2) of the statutes is amended to read:
AB481,43,6
1409.317 (2) Buyers that receive delivery. Except as otherwise provided in
2sub. (5), a buyer, other than a secured party, of tangible chattel paper, tangible
3documents, goods, instruments, or a security certificate takes free of a security
4interest or agricultural lien if the buyer gives value and receives delivery of the
5collateral without knowledge of the security interest or agricultural lien and before
6it is perfected.
AB481, s. 48 7Section 48. 409.317 (4) of the statutes is amended to read:
AB481,43,138 409.317 (4) Licensees and buyers of certain collateral. A licensee of a
9general intangible or a buyer, other than a secured party, of accounts, electronic
10chattel paper, electronic documents, general intangibles, or investment property
11other than a certificated security takes free of a security interest if the licensee or
12buyer gives value without knowledge of the security interest and before it is
13perfected.
AB481, s. 49 14Section 49. 409.338 (2) of the statutes is amended to read:
AB481,43,1915 409.338 (2) A purchaser, other than a secured party, of the collateral takes free
16of the security interest or agricultural lien to the extent that, in reasonable reliance
17upon the incorrect information, the purchaser gives value and, in the case of tangible
18chattel paper, tangible documents, goods, instruments, or a security certificate,
19receives delivery of the collateral.
AB481, s. 50 20Section 50. 409.601 (2) of the statutes is amended to read:
AB481,43,2421 409.601 (2) Rights and duties of secured party in possession or control. A
22secured party in possession of collateral or control of collateral under s. 407.106,
23409.104, 409.105, 409.106, or 409.107 has the rights and duties provided in s.
24409.207.
AB481, s. 51 25Section 51. 411.103 (1) (a) of the statutes is amended to read:
AB481,44,8
1411.103 (1) (a) "Buyer in ordinary course of business" means a person who, in
2good faith and without knowledge that the sale to him or her is in violation of the
3ownership rights or security interest or leasehold interest of a 3rd party in the goods,
4buys in ordinary course from a person in the business of selling goods of that kind
5but does not include a pawnbroker. "Buying" may be for cash or by exchange of other
6property or on secured or unsecured credit and includes receiving acquiring goods or
7documents of title under a preexisting contract for sale but does not include a
8transfer in bulk or as security for or in total or partial satisfaction of a money debt.
AB481, s. 52 9Section 52. 411.103 (1) (o) of the statutes is amended to read:
AB481,44,1810 411.103 (1) (o) "Lessee in ordinary course of business" means a person who in
11good faith and without knowledge that the lease to him or her is in violation of the
12ownership rights or security interest or leasehold interest of a 3rd party in the goods
13leases in ordinary course from a person in the business of selling or leasing goods of
14that kind but does not include a pawnbroker. "Leasing" may be for cash or by
15exchange of other property or on secured or unsecured credit and includes receiving
16acquiring goods or documents of title under a preexisting lease contract but does not
17include a transfer in bulk or as security for or in total or partial satisfaction of a
18money debt.
AB481, s. 53 19Section 53. 411.514 (2) of the statutes is amended to read:
AB481,44,2220 411.514 (2) A lessee's failure to reserve rights when paying rent or other
21consideration against documents precludes recovery of the payment for defects
22apparent on the face of in the documents.
AB481, s. 54 23Section 54. 411.526 (2) (c) of the statutes is amended to read:
AB481,44,2524 411.526 (2) (c) Acknowledgment to the lessee by a carrier via reshipment or as
25a warehouse keeper that the carrier holds the goods for the lessee.
AB481, s. 55
1Section 55. Initial applicability.
AB481,45,32 (1) This act first applies to a document of title that is issued or a bailment that
3arises on the effective date of this subsection.
AB481, s. 56 4Section 56. Effective date.
AB481,45,65 (1) This act takes effect on the first day of the 3rd month beginning after
6publication.
AB481,45,77 (End)
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