Chapter 409

409.329 409.329 Priority of security interests in letter-of-credit right. The following rules govern priority among conflicting security interests in the same letter-of-credit right:

409.329(1) (1) Control by secured party. A security interest held by a secured party having control of the letter-of-credit right under s. 409.107 has priority to the extent of its control over a conflicting security interest held by a secured party that does not have control.

409.329(2) (2) Priority in time of control. Security interests perfected by control under s. 409.314 rank according to priority in time of obtaining control.

409.329 History History: 2001 a. 10.

409.330 409.330 Priority of purchaser of chattel paper or instrument.

409.330(1) (1) Purchaser’s priority: security interest claimed merely as proceeds. A purchaser of chattel paper has priority over a security interest in the chattel paper which is claimed merely as proceeds of inventory subject to a security interest if:

409.330(1)(a) (a) In good faith and in the ordinary course of the purchaser’s business, the purchaser gives new value and takes possession of the chattel paper or obtains control of the chattel paper under s. 409.105; and

409.330(1)(b) (b) The chattel paper does not indicate that it has been assigned to an identified assignee other than the purchaser.

409.330(2) (2) Purchaser’s priority: other security interests. A purchaser of chattel paper has priority over a security interest in the chattel paper which is claimed other than merely as proceeds of inventory subject to a security interest if the purchaser gives new value and takes possession of the chattel paper or obtains control of the chattel paper under s. 409.105 in good faith, in the ordinary course of the purchaser’s business, and without knowledge that the purchase violates the rights of the secured party.

409.330(3) (3) Chattel paper purchaser’s priority in proceeds. Except as otherwise provided in s. 409.327, a purchaser having priority in chattel paper under sub. (1) or (2) also has priority in proceeds of the chattel paper to the extent that:

409.330(3)(a) (a) Section 409.322 provides for priority in the proceeds; or

409.330(3)(b) (b) The proceeds consist of the specific goods covered by the chattel paper or cash proceeds of the specific goods, even if the purchaser’s security interest in the proceeds is unperfected.

409.330(4) (4) Instrument purchaser’s priority. Except as otherwise provided in s. 409.331 (1), a purchaser of an instrument has priority over a security interest in the instrument perfected by a method other than possession if the purchaser gives value and takes possession of the instrument in good faith and without knowledge that the purchase violates the rights of the secured party.

409.330(5) (5) Holder of purchase-money security interest gives new value. For purposes of subs. (1) and (2), the holder of a purchase-money security interest in inventory gives new value for chattel paper constituting proceeds of the inventory.

409.330(6) (6) Indication of assignment gives knowledge. For purposes of subs. (2) and (4), if chattel paper or an instrument indicates that it has been assigned to an identified secured party other than the purchaser, a purchaser of the chattel paper or instrument has knowledge that the purchase violates the rights of the secured party.

409.330 History History: 2001 a. 10.

409.331 409.331 Priority of rights of purchasers of instruments, documents, and securities under other chapters; priority of interests in financial assets and security entitlements under ch. 408.

409.331(1) (1) Rights under chs. 403, 407, and 408 not limited. This chapter does not limit the rights of a holder in due course of a negotiable instrument, a holder to which a negotiable document of title has been duly negotiated, or a protected purchaser of a security. These holders or purchasers take priority over an earlier security interest, even if perfected, to the extent provided in chs. 403, 407, and 408.

409.331(2) (2) Protection under ch. 408. This chapter does not limit the rights of or impose liability on a person to the extent that the person is protected against the assertion of an adverse claim under ch. 408.

409.331(3) (3) Filing not notice. Filing under this chapter does not constitute notice of a claim or defense to the holders, or purchasers, or persons described in subs. (1) and (2).

409.331 History History: 2001 a. 10.

409.332 409.332 Transfer of money; transfer of funds from deposit account.

409.332(1) (1) Transferee of money. A transferee of money takes the money free of a security interest unless the transferee acts in collusion with the debtor in violating the rights of the secured party.

409.332(2) (2) Transferee of funds from deposit account. A transferee of funds from a deposit account takes the funds free of a security interest in the deposit account unless the transferee acts in collusion with the debtor in violating the rights of the secured party.

409.332 History History: 2001 a. 10.

409.333 409.333 Priority of certain liens arising by operation of law.

409.333(1) (1) Possessory lien. In this section, “possessory lien” means an interest, other than a security interest or an agricultural lien:

409.333(1)(a) (a) Which secures payment or performance of an obligation for services or materials furnished with respect to goods by a person in the ordinary course of the person’s business;

409.333(1)(b) (b) Which is created by statute or rule of law in favor of the person; and

409.333(1)(c) (c) Whose effectiveness depends on the person’s possession of the goods.

409.333(2) (2) Priority of possessory lien. A possessory lien on goods has priority over a security interest in the goods unless the lien is created by a statute that expressly provides otherwise.

409.333 History History: 2001 a. 10.

409.333 Annotation A lien under s. 779.43 (3) is contingent on possession and is a possessory lien under sub. (1) with priority over a security interest. Premier Community Bank v. Schuh, 2010 WI App 111, 329 Wis. 2d 146, 789 N.W.2d 388, 09-1722.

409.334 409.334 Priority of security interests in fixtures and crops.

409.334(1) (1) Security interest in fixtures under this chapter. A security interest under this chapter may be created in goods that are fixtures or may continue in goods that become fixtures. A security interest does not exist under this chapter in ordinary building materials incorporated into an improvement on land.

409.334(2) (2) Security interest in fixtures under real property law. This chapter does not prevent creation of an encumbrance upon fixtures under real property law.

409.334(3) (3) General rule: subordination of security interest in fixtures. In cases not governed by subs. (4) to (8), a security interest in fixtures is subordinate to a conflicting interest of an encumbrancer or owner of the related real property other than the debtor.

409.334(4) (4) Fixtures purchase-money priority. Except as otherwise provided in sub. (8), a perfected security interest in fixtures has priority over a conflicting interest of an encumbrancer or owner of the real property if the debtor has an interest of record in or is in possession of the real property and:

409.334(4)(a) (a) The security interest is a purchase-money security interest;

409.334(4)(b) (b) The interest of the encumbrancer or owner arises before the goods become fixtures; and

409.334(4)(c) (c) The security interest is perfected by a fixture filing before the goods become fixtures or within 20 days thereafter.

409.334(5) (5) Priority of security interest in fixtures over interests in real property. A perfected security interest in fixtures has priority over a conflicting interest of an encumbrancer or owner of the real property if:

409.334(5)(a) (a) The debtor has an interest of record in the real property or is in possession of the real property and the security interest:

409.334(5)(a)1. 1. Is perfected by a fixture filing before the interest of the encumbrancer or owner is of record; and

409.334(5)(a)2. 2. Has priority over any conflicting interest of a predecessor in title of the encumbrancer or owner;

409.334(5)(b) (b) Before the goods become fixtures, the security interest is perfected by any method permitted by this chapter and the fixtures are readily removable:

409.334(5)(b)1. 1. Factory or office machines;

409.334(5)(b)2. 2. Equipment that is not primarily used or leased for use in the operation of the real property; or

409.334(5)(b)3. 3. Replacements of domestic appliances that are consumer goods;

409.334(5)(c) (c) The conflicting interest is a lien on the real property obtained by legal or equitable proceedings after the security interest was perfected by any method permitted by this chapter; or

409.334(5)(d) (d) The security interest is:

409.334(5)(d)1. 1. Created in a manufactured home in a manufactured-home transaction; and

409.334(5)(d)2. 2. Perfected pursuant to a statute described in s. 409.311 (1) (b) or (f).

409.334(6) (6) Priority based on consent, disclaimer, or right to remove. A security interest in fixtures, whether or not perfected, has priority over a conflicting interest of an encumbrancer or owner of the real property if:

409.334(6)(a) (a) The encumbrancer or owner has, in an authenticated record, consented to the security interest or disclaimed an interest in the goods as fixtures; or

409.334(6)(b) (b) The debtor has a right to remove the goods as against the encumbrancer or owner.

409.334(7) (7) Continuation of sub. (6) priority. The priority of the security interest under sub. (6) (b) continues for a reasonable time if the debtor’s right to remove the goods as against the encumbrancer or owner terminates.

409.334(8) (8) Priority of construction mortgage. 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 a recorded record of the mortgage so indicates. Except as otherwise provided in subs. (5) and (6), a security interest in fixtures is subordinate to a construction mortgage if a record of the mortgage is recorded before the goods become fixtures and the goods become fixtures before the completion of the construction. A mortgage has this priority to the same extent as a construction mortgage to the extent that it is given to refinance a construction mortgage.

409.334(9) (9) Priority of security interest in crops. A perfected security interest in crops growing on real property has priority over a conflicting interest of an encumbrancer or owner of the real property if the debtor has an interest of record in or is in possession of the real property.

409.334 History History: 2001 a. 10.

409.335 409.335 Accessions.

409.335(1) (1) Creation of security interest in accession. A security interest may be created in an accession and continues in collateral that becomes an accession.

409.335(2) (2) Perfection of security interest. If a security interest is perfected when the collateral becomes an accession, the security interest remains perfected in the collateral.

409.335(3) (3) Priority of security interest. Except as otherwise provided in sub. (4), the other provisions of this subchapter determine the priority of a security interest in an accession.

409.335(4) (4) Compliance with certificate-of-title statute. A security interest in an accession is subordinate to a security interest in the whole which is perfected by compliance with the requirements of a certificate-of-title statute under s. 409.311 (2).

409.335(5) (5) Removal of accession after default. After default, subject to subch. VI, a secured party may remove an accession from other goods if the security interest in the accession has priority over the claims of every person having an interest in the whole.

409.335(6) (6) Reimbursement following removal. A secured party that removes an accession from other goods under sub. (5) shall promptly reimburse any holder of a security interest or other lien on, or owner of, the whole or of the other goods, other than the debtor, for the cost of repair of any physical injury to the whole or the other goods. The secured party need not reimburse the holder or owner for any diminution in value of the whole or the other goods caused by the absence of the accession removed or by any necessity for replacing it. A person entitled to reimbursement may refuse permission to remove an accession until the secured party gives adequate assurance for the performance of the obligation to reimburse.

409.335 History History: 2001 a. 10.

409.336 409.336 Commingled goods.

409.336(1) (1) Commingled goods. In this section, “commingled goods” means goods that are physically united with other goods in such a manner that their identity is lost in a product or mass.

409.336(2) (2) No security interest in commingled goods as such. A security interest does not exist in commingled goods as such. However, a security interest may attach to a product or mass that results when goods become commingled goods.

409.336(3) (3) Attachment of security interest to product or mass. If collateral becomes commingled goods, a security interest attaches to the product or mass.

409.336(4) (4) Perfection of security interest. If a security interest in collateral is perfected before the collateral becomes commingled goods, the security interest that attaches to the product or mass under sub. (3) is perfected.

409.336(5) (5) Priority of security interest. Except as otherwise provided in sub. (6), the other provisions of this subchapter determine the priority of a security interest that attaches to the product or mass under sub. (3).

409.336(6) (6) Conflicting security interests in product or mass. If more than one security interest attaches to the product or mass under sub. (3), the following rules determine priority:

409.336(6)(a) (a) A security interest that is perfected under sub. (4) has priority over a security interest that is unperfected at the time the collateral becomes commingled goods.

409.336(6)(b) (b) If more than one security interest is perfected under sub. (4), the security interests rank equally in proportion to the value of the collateral at the time it became commingled goods.

409.336 History History: 2001 a. 10.

409.337 409.337 Priority of security interests in goods covered by certificate of title. If, while a security interest in goods is perfected by any method under the law of another jurisdiction, this state issues a certificate of title that does not show that the goods are subject to the security interest or contain a statement that they may be subject to security interests not shown on the certificate:

409.337(1) (1) A buyer of the goods, other than a person in the business of selling goods of that kind, takes free of the security interest if the buyer gives value and receives delivery of the goods after issuance of the certificate and without knowledge of the security interest; and

409.337(2) (2) The security interest is subordinate to a conflicting security interest in the goods that attaches, and is perfected under s. 409.311 (2), after issuance of the certificate and without the conflicting secured party’s knowledge of the security interest.

409.337 History History: 2001 a. 10.

409.338 409.338 Priority of security interest or agricultural lien perfected by filed financing statement providing certain incorrect information. If a security interest or agricultural lien is perfected by a filed financing statement providing information described in s. 409.516 (2) (e) which is incorrect at the time the financing statement is filed:

409.338(1) (1) The security interest or agricultural lien is subordinate to a conflicting perfected security interest in the collateral to the extent that the holder of the conflicting security interest gives value in reasonable reliance upon the incorrect information; and

409.338(2) (2) A purchaser, other than a secured party, of the collateral takes free of the security interest or agricultural lien to the extent that, in reasonable reliance upon the incorrect information, the purchaser gives value and, in the case of tangible chattel paper, tangible documents, goods, instruments, or a security certificate, receives delivery of the collateral.

409.338 History History: 2001 a. 10; 2009 a. 322.

409.339 409.339 Priority subject to subordination. This chapter does not preclude subordination by agreement by a person entitled to priority.

409.339 History History: 2001 a. 10.

409.340 409.340 Effectiveness of right of recoupment or setoff against deposit account.