VALIDITY OF SECURITY AGREEMENT
AND RIGHTS OF PARTIES THERETO
409.201
409.201
General validity of security interest. Except as otherwise provided by
chs. 401 to
411 a security agreement is effective according to its terms between the parties, against purchasers of the collateral and against creditors. Nothing in this chapter validates any charge or practice illegal under any statute or regulation thereunder governing usury, small loans, retail instalment sales, or the like, or under
chs. 421 to
427 and
429, or extends the application of any such statute or regulation to any transaction not otherwise subject thereto.
409.202
409.202
Title to collateral immaterial. Each provision of this chapter with regard to rights, obligations and remedies applies whether title to collateral is in the secured party or in the debtor.
409.202 Annotation
A person with a voidable title in property, having the power to pass title to a good faith purchaser under s. 402.403, may transfer a security interest in that property. Return of Property in State v. Pippin,
176 Wis. 2d 418,
500 N.W.2d 407 (Ct. App. 1993).
409.203
409.203
Attachment and enforceability of security interest; proceeds; formal requisites. 409.203(1)
(1) Subject to
s. 404.210 on the security interest of a collecting bank,
ss. 409.115 and
409.116 on security interests in investment property, and
s. 409.113 on a security interest arising under
ch. 402 or
411, a security interest is not enforceable against the debtor or 3rd parties with respect to the collateral and does not attach unless:
409.203(1)(a)
(a) The collateral is in the possession of the secured party pursuant to agreement, the collateral is investment property and the secured party has control pursuant to agreement, or the debtor has signed a security agreement which contains a description of the collateral and in addition, when the security interest covers timber to be cut, a description of the land concerned;
409.203(2)
(2) A security agreement 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) provides otherwise.
409.203(3)
(3) A security interest attaches when it becomes enforceable against the debtor with respect to the collateral. Attachment occurs as soon as all of the events specified in
sub. (1) have taken place unless explicit agreement postpones the time of attaching.
409.203(4)
(4) Unless otherwise agreed a security agreement gives the secured party the rights to proceeds under
s. 409.306.
409.203(5)
(5) A transaction, although subject to this chapter, is also subject to
chs. 138,
421 to
427 and
429 and
s. 182.025, or any other similar statute which may be applicable to the particular transaction, and in the case of conflict between this chapter and any such statute, such statute controls. Failure to comply with any applicable statute has only the effect which is specified therein.
409.203 Annotation
A security interest in all of a trucking company's "equipment" reasonably identified trucks as collateral. Milwaukee Mack Sales v. First Wis. Nat. Bank,
93 Wis. 2d 589,
287 N.W.2d 708 (1980).
409.203 Annotation
A provision in an instrument prohibiting transfer of the instrument did not render a security interest in the instrument unenforceable under sub. (1) (c). Belke v. M & I First National Bank of Stevens Point,
189 Wis. 2d 385,
525 N.W.2d 737 (Ct. App. 1994).
409.203 Annotation
If the terms of a security agreement establish that attachment is contingent on subsequent specification of the collateral, the secured party has no security interest before the satisfaction of the contingency. A security agreement requiring the designation of the accounts to serve as collateral gave no security interest when no designation was made. Sierra Finance Corp. v. Excel Laboratories, LLC,
223 Wis. 2d 694,
589 N.W.2d 432 (Ct. App. 1998).
409.204
409.204
After-acquired property; future advances. 409.204(1)(1) Except as provided in
sub. (2), a security agreement may provide that any or all obligations covered by the security agreement are to be secured by after-acquired collateral.
409.204(2)
(2) No security interest attaches under an after-acquired property clause to consumer goods other than accessions under
s. 409.314 when given as additional security unless the debtor acquires rights in them within 10 days after the secured party gives value.
409.204(3)
(3) Obligations covered by a security agreement may include future advances or other value whether or not the advances or value are given pursuant to commitment (
s. 409.105 (1)).
409.204 History
History: 1973 c. 215.
409.204 Annotation
A security agreement covering money lent "and all other obligations and liabilities" will not extend to obligations arising out of contract violations unless they were clearly within the intent of the parties. John Miller Supply Co. v. Western State Bank,
55 Wis. 2d 385,
199 N.W.2d 161 (1972).
409.204 Annotation
Priorities of "future advances" under previously perfected security interests and article 9 of the U.C.C. 58 MLR 759.
409.204 Annotation
Security interests in after-acquired property under the uniform commercial code. Skilton, 1974 WLR 925.
409.205
409.205
Use or disposition of collateral without accounting permissible. A security interest is not invalid or fraudulent against creditors by reason of liberty in the debtor to use, commingle or dispose of all or part of the collateral (including returned or repossessed goods) or to collect or compromise accounts or chattel paper, or to accept the return of goods or make repossessions, or to use, commingle or dispose of proceeds, or by reason of the failure of the secured party to require the debtor to account for proceeds or replace collateral. This section does not relax the requirements of possession where perfection of a security interest depends upon possession of the collateral by the secured party or by a bailee.
409.205 History
History: 1973 c. 215.
409.205 Annotation
Under s. 409.205 the debtor is freed from strict accountability to the secured creditor for the property secured and the validity of a secured interest in after-acquired property specifically recognized. When a creditor has a security interest in the debtor's after-acquired property the debtor is able to commingle his property and use it to his best interest. The acquiescence of the secured creditor under an after-acquired clause by the debtor does not invalidate the security interest of the creditor. Burlington National Bank v. Strauss,
50 Wis. 2d 270,
184 N.W.2d 122 (1971).
409.206
409.206
Agreement not to assert defenses against assignee; modification of sales warranties where security agreement exists. 409.206(1)
(1) Subject to any statute or decision which establishes a different rule for buyers or lessees of consumer goods, an agreement by a buyer or lessee not to assert against an assignee any claim or defense which the buyer or lessee may have against the seller or lessor is enforceable by an assignee who takes an assignment for value, in good faith and without notice of a claim or defense, except as to defenses of a type which may be asserted against a holder in due course of a negotiable instrument under
ch. 403. A buyer who as part of one transaction signs both a negotiable instrument and a security agreement makes such an agreement.
409.206(2)
(2) When a seller retains a purchase money security interest in goods
ch. 402 governs the sale and any disclaimer, limitation or modification of the seller's warranties.
409.206 History
History: 1991 a. 316.
409.207
409.207
Rights and duties when collateral is in secured party's possession. 409.207(1)
(1) A secured party must use reasonable care in the custody and preservation of collateral in the secured party's possession. In the case of an instrument or chattel paper reasonable care includes taking necessary steps to preserve rights against prior parties unless otherwise agreed.
409.207(2)
(2) Unless otherwise agreed, when collateral is in the secured party's possession:
409.207(2)(a)
(a) Reasonable expenses (including the cost of any 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;
409.207(2)(b)
(b) The risk of accidental loss or damage is on the debtor to the extent of any deficiency in any effective insurance coverage;
409.207(2)(c)
(c) The secured party may hold as additional security any increase or profits (except money) received from the collateral, but money so received, unless remitted to the debtor, shall be applied in reduction of the secured obligation;
409.207(2)(d)
(d) The secured party must keep the collateral identifiable but fungible collateral may be commingled;
409.207(2)(e)
(e) The secured party may repledge the collateral upon terms which do not impair the debtor's right to redeem it.
409.207(3)
(3) A secured party is liable for any loss caused by the secured party's failure to meet any obligation imposed by
subs. (1) and
(2) but does not lose his or her security interest.
409.207(4)
(4) A secured party may use or operate the collateral for the purpose of preserving the collateral or its value or pursuant to the order of a court of appropriate jurisdiction or, except in the case of consumer goods, in the manner and to the extent provided in the security agreement.
409.207 History
History: 1991 a. 316.
409.207 Annotation
Sub. (2) (c) does not require putting money held as security in an interest bearing account. That a bank had the beneficial use of money does not mean that interest was earned that must be applied under sub. (2) (c). Demotropoulous v. Bank One Milwaukee, N.A.
953 F. Supp. 974 (1997).
409.207 Annotation
Pledged securities - the pledgee's duty to preserve value under the UCC. 62 MLR 391 (1979).
409.208
409.208
Request for statement of account or list of collateral. 409.208(1)(1) A debtor may sign a statement indicating what the debtor believes to be the aggregate amount of unpaid indebtedness as of a specified date and may send it to the secured party with a request that the statement be approved or corrected and returned to the debtor. When the security agreement or any other record kept by the secured party identifies the collateral a debtor may similarly request the secured party to approve or correct a list of the collateral.
409.208(2)
(2) The secured party must comply with such a request within 2 weeks after receipt by sending a written correction or approval. If the secured party claims a security interest in all of a particular type of collateral owned by the debtor the secured party may indicate that fact in the secured party's reply and need not approve or correct an itemized list of such collateral. If the secured party without reasonable excuse fails to comply the secured party is liable for any loss caused to the debtor thereby; and if the debtor has properly included in the request a good faith statement of the obligation or a list of the collateral or both the secured party may claim a security interest only as shown in the statement against persons misled by the secured party's failure to comply. If the secured party no longer has an interest in the obligation or collateral at the time the request is received the secured party must disclose the name and address of any successor in interest known to the secured party and the secured party is liable for any loss caused to the debtor as a result of failure to disclose. A successor in interest is not subject to this section until a request is received by the successor in interest.
409.208(3)
(3) A debtor is entitled to such a statement once every 6 months without charge. The secured party may require payment of a charge not exceeding $10 for each additional statement furnished.
409.208 History
History: 1991 a. 316.
RIGHTS OF THIRD PARTIES; PERFECTED AND UNPERFECTED SECURITY INTERESTS; RULES OF PRIORITY
409.301
409.301
Persons who take priority over unperfected security interests; rights of "lien creditor". 409.301(1)
(1) Except as otherwise provided in
sub. (2), an unperfected security interest is subordinate to the rights of:
409.301(1)(b)
(b) A person who becomes a lien creditor before the security interest is perfected;
409.301(1)(c)
(c) In the case of goods, instruments, documents and chattel paper, a person who is not a secured party and who is a transferee in bulk or other buyer not in ordinary course of business, or is a buyer of farm products in ordinary course of business, to the extent that that person gives value and receives delivery of the collateral without knowledge of the security interest and before it is perfected;
409.301(1)(d)
(d) In the case of accounts, general intangibles and investment property, a person who is not a secured party and who is a transferee to the extent that that person gives value without knowledge of the security interest and before it is perfected.
409.301(2)
(2) If the secured party files with respect to a purchase money security interest before or within 20 days after the debtor receives possession of the collateral, the secured party takes priority over the rights of a transferee in bulk or of a lien creditor which arise between the time the security interest attaches and the time of filing.
409.301(3)
(3) A "lien creditor" means a creditor who has acquired a lien on the property involved by attachment, levy or the like and includes an assignee for benefit of creditors from the time of assignment, and a trustee in bankruptcy from the date of the filing of the petition or a receiver in equity from the time of appointment.
409.301(4)
(4) A person who becomes a lien creditor while a security interest is perfected takes subject to the security interest only to the extent that it secures advances made before that person becomes a lien creditor or within 45 days thereafter or made without knowledge of the lien or pursuant to a commitment entered into without knowledge of the lien.
409.301 Annotation
A lien creditor haas priority over an unperfected security interest. Whether the lien creditor has knowledge of the security is immaterial. Muggli Dental Studio v. Taylor,
142 Wis. 2d 696,
419 N.W.2d 322 (Ct. App. 1987).
409.302
409.302
When filing is required to perfect security interest; security interests to which filing provisions of this chapter do not apply. 409.302(1)
(1) A financing statement must be filed to perfect all security interests except the following:
409.302(1)(a)
(a) A security interest in collateral in possession of the secured party under
s. 409.305;
409.302(1)(b)
(b) A security interest temporarily perfected in instruments, certificated securities, or documents without delivery under
s. 409.304 or in proceeds for a 10-day period under
s. 409.306;
409.302(1)(c)
(c) A security interest created by an assignment of a beneficial interest in a trust or a decedent's estate;
409.302(1)(d)
(d) A purchase money security interest in consumer goods; but fixture filing is required for priority over conflicting interests in fixtures to the extent provided in
s. 409.313;
409.302(1)(e)
(e) An assignment of accounts which does not alone or in conjunction with other assignments to the same assignee transfer a significant part of the outstanding accounts of the assignor;
409.302(1)(g)
(g) An assignment for the benefit of all the creditors of the transferor, and subsequent transfers by the assignee thereunder; or
409.302(2)
(2) If a secured party assigns a perfected security interest, no filing under this chapter is required in order to continue the perfected status of the security interest against creditors of and transferees from the original debtor.
409.302(3)
(3) The filing provisions of this chapter are not necessary or effective to perfect a security interest in property subject to any of the following:
409.302(3)(a)
(a) A statute or treaty of the United States which provides for a national or international registration or a national or international certificate of title or which specifies a place of filing different from that specified in this chapter for filing of the security interest.
409.302(3)(b)
(b) The following vehicle title statutes:
ss. 342.19
and
342.20; but during any period in which collateral is inventory held for sale by a person who is in the business of selling goods of that kind, the filing provisions of
ss. 409.401 to
409.408 apply to a security interest in that collateral created by that person as debtor.
409.302(3)(bm)
(bm) The following boat title statutes:
ss. 30.57,
30.572 and
30.573; but during any period in which collateral is inventory held for sale by a person who is in the business of selling goods of that kind, the filing provisions of
ss. 409.401 to
409.408 apply to a security interest in that collateral created by that person as debtor.
409.302(3)(c)
(c) A certificate of title statute of another jurisdiction under the law of which indication of a security interest on the certificate is required as a condition of perfection (
s. 409.103 (2)).
409.302(4)
(4) Compliance with a statute or treaty described in
sub. (3) is equivalent to the filing of a financing statement under this chapter, and a security interest in property subject to the statute or treaty can be perfected only by compliance therewith except as provided in
s. 409.103 on multiple state transactions. Duration and renewal of perfection of a security interest perfected by compliance with the statute or treaty are governed by the provisions of the statute or treaty; in other respects the security interest is subject to this chapter.
409.302 Annotation
Legislative Council Note, 1973: The language of sub. (3) (intro.) has been changed from that contained in the official text in order to conform more closely to the stylistic approach of present s. 409.302 (3) without making a substantive change. Filing under the vehicle title statutes specified in sub. (3) (b) is the exclusive method of perfection with respect to mobile homes and certain other vehicles. Sub. (3) (b) is a restatement of present s. 409.302 (5). Sub. (3) (d) is not contained in the official text. It is a restatement of present s. 409.302 (3) (intro.) and (b). The provisions of sub. (5) are incorporated into s. 409.302 (3) (b). (Bill 177-S)
409.303
409.303
When security interest is perfected; continuity of perfection. 409.303(1)(1) A security interest is perfected when it has attached and when all of the applicable steps required for perfection have been taken. Such steps are specified in
ss. 409.115,
409.302,
409.304,
409.305 and
409.306. If such steps are taken before the security interest attaches, it is perfected at the time when it attaches.
409.303(2)
(2) If a security interest is originally perfected in any way permitted under this chapter and is subsequently perfected in some other way under this chapter, without an intermediate period when it was unperfected, the security interest shall be deemed to be perfected continuously for the purposes of this chapter.
409.303 History
History: 1997 a. 297.
