Chapter 409

409.102(2)(qm) (qm) “Security entitlement” — s. 408.102.

409.102(2)(r) (r) “Uncertificated security” — s. 408.102.

409.102(3) (3) Chapter 401 definitions and principles. Chapter 401 contains general definitions and principles of construction and interpretation applicable throughout this chapter.

409.102 History History: 2001 a. 10; 2003 a. 321; 2009 a. 322; 2011 a. 206; 2015 a. 196; 2017 a. 365 s. 111.

409.102 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).

409.102 Annotation Goods classified as “inventory” while in the possession of a debtor remain “inventory” while on lease status in the possession of the lessee. In re Watertown Tractor & Equipment Company., Inc. 94 Wis. 2d 622, 289 N.W.2d 288 (1980).

409.102 Note NOTE: The above annotated materials cite to the pre-2001 Wis. Act 10 version of ch. 409.

409.102 Annotation There is a real difference between a claim from which proceeds arise and the proceeds themselves. Public policy does not prohibit the assignment of potential proceeds in a malpractice claim as a payment intangible. Concluding otherwise would contravene the clear meaning of provisions of ch. 409 and could be seen as favoring lawyers against whom legal malpractice claims are filed. Attorney’s Title Guaranty Fund, Inc. v. Town Bank, 2014 WI 63, 355 Wis. 2d 229, 850 N.W.2d 28, 11-2774.

409.103 409.103 Purchase-money security interest; application of payments; burden of establishing.

409.103(1) (1) Definitions. In this section:

409.103(1)(a) (a) “Purchase-money collateral” means goods or software that secures a purchase-money obligation incurred with respect to that collateral.

409.103(1)(b) (b) “Purchase-money obligation” means an obligation of an obligor incurred as all or part of the price of the collateral or for value given to enable the debtor to acquire rights in or the use of the collateral if the value is in fact so used.

409.103(2) (2) Purchase-money security interest in goods. A security interest in goods is a purchase-money security interest:

409.103(2)(a) (a) To the extent that the goods are purchase-money collateral with respect to that security interest;

409.103(2)(b) (b) If the security interest is in inventory that is or was purchase-money collateral, also to the extent that the security interest secures a purchase-money obligation incurred with respect to other inventory in which the secured party holds or held a purchase-money security interest; and

409.103(2)(c) (c) Also to the extent that the security interest secures a purchase-money obligation incurred with respect to software in which the secured party holds or held a purchase-money security interest.

409.103(3) (3) Purchase-money security interest in software. A security interest in software is a purchase-money security interest to the extent that the security interest also secures a purchase-money obligation incurred with respect to goods in which the secured party holds or held a purchase-money security interest if:

409.103(3)(a) (a) The debtor acquired its interest in the software in an integrated transaction in which it acquired an interest in the goods; and

409.103(3)(b) (b) The debtor acquired its interest in the software for the principal purpose of using the software in the goods.

409.103(4) (4) Consignor’s inventory purchase-money security interest. The security interest of a consignor in goods that are the subject of a consignment is a purchase-money security interest in inventory.

409.103(5) (5) Application of payment in nonconsumer-goods transaction. In a transaction other than a consumer-goods transaction, if the extent to which a security interest is a purchase-money security interest depends on the application of a payment to a particular obligation, the payment must be applied:

409.103(5)(a) (a) In accordance with any reasonable method of application to which the parties agree;

409.103(5)(b) (b) In the absence of the parties’ agreement to a reasonable method, in accordance with any intention of the obligor manifested at or before the time of payment; or

409.103(5)(c) (c) In the absence of an agreement to a reasonable method and a timely manifestation of the obligor’s intention, in the following order:

409.103(5)(c)1. 1. To obligations that are not secured; and

409.103(5)(c)2. 2. If more than one obligation is secured, to obligations secured by purchase-money security interests in the order in which those obligations were incurred.

409.103(6) (6) No loss of status of purchase-money security interest in nonconsumer-goods transaction. In a transaction other than a consumer-goods transaction, a purchase-money security interest does not lose its status as such, even if:

409.103(6)(a) (a) The purchase-money collateral also secures an obligation that is not a purchase-money obligation;

409.103(6)(b) (b) Collateral that is not purchase-money collateral also secures the purchase-money obligation; or

409.103(6)(c) (c) The purchase-money obligation has been renewed, refinanced, consolidated, or restructured.

409.103(7) (7) Burden of proof in nonconsumer-goods transaction. In a transaction other than a consumer-goods transaction, a secured party claiming a purchase-money security interest has the burden of establishing the extent to which the security interest is a purchase-money security interest.

409.103(8) (8) Nonconsumer-goods transactions; no inference. The limitation of the rules in subs. (5) to (7) to transactions other than consumer-goods transactions is intended to leave to the court the determination of the proper rules in consumer-goods transactions. The court may not infer from that limitation the nature of the proper rule in consumer-goods transactions and may continue to apply established approaches.

409.103 History History: 2001 a. 10.

409.1035 409.1035 Production-money crops; production-money obligation; production-money security interest; burden of establishing.

409.1035(1) (1) A security interest in crops is a production-money security interest to the extent that the crops are production-money crops.

409.1035(2) (2) If the extent to which a security interest is a production-money security interest depends on the application of a payment to a particular obligation, the payment must be applied in the following order until fully applied:

409.1035(2)(a) (a) First, to all production-money obligations secured by production-money crops, in the order in which those obligations were incurred;

409.1035(2)(b) (b) Second, to all obligations secured by conflicting security interests in the production-money crops referred to in par. (a), in the order in which those obligations were incurred; and

409.1035(2)(c) (c) Third, to all unsecured obligations of the debtor making the payment, in the order in which those obligations were incurred.

409.1035(3) (3) A production-money security interest does not lose its status as such, even if:

409.1035(3)(a) (a) The production-money crops also secure an obligation that is not a production-money obligation;

409.1035(3)(b) (b) Collateral that is not production-money crops also secures the production-money obligation; or

409.1035(3)(c) (c) The production-money obligation has been renewed, refinanced, or restructured.

409.1035(4) (4) A secured party claiming a production-money security interest has the burden of establishing the extent to which the security interest is a production-money security interest.

409.1035(5) (5) This section does not affect any right to proceeds under s. 409.315.

409.1035(6) (6) A person may not claim a purchase-money security interest in crops grown, growing, or to be grown.

409.1035 History History: 2001 a. 10.

409.104 409.104 Control of deposit account.

409.104(1) (1) Requirements for control. A secured party has control of a deposit account if:

409.104(1)(a) (a) The secured party is the bank with which the deposit account is maintained;

409.104(1)(b) (b) The debtor, secured party, and bank have agreed in an authenticated record that the bank will comply with instructions originated by the secured party directing disposition of the funds in the deposit account without further consent by the debtor; or

409.104(1)(c) (c) The secured party becomes the bank’s customer with respect to the deposit account.

409.104(2) (2) Debtor’s right to direct disposition. A secured party that has satisfied sub. (1) has control, even if the debtor retains the right to direct the disposition of funds from the deposit account.

409.104 History History: 2001 a. 10.

409.105 409.105 Control of electronic chattel paper.

409.105(1m) (1m) General rule: control of electronic chattel paper. A secured party has control of electronic chattel paper if a system employed for evidencing the transfer of interests in the chattel paper reliably establishes the secured party as the person to which the chattel paper was assigned.

409.105(2m) (2m) Specific facts giving control. Without limiting the generality of sub. (1m), a system satisfies sub. (1m) if the record or records comprising the chattel paper are created, stored, and assigned in such a manner that:

409.105(2m)(a) (a) A single authoritative copy of the record or records exists which is unique, identifiable, and, except as otherwise provided in pars. (d) to (f), unalterable;

409.105(2m)(b) (b) The authoritative copy identifies the secured party as the assignee of the record or records;

409.105(2m)(c) (c) The authoritative copy is communicated to and maintained by the secured party or its designated custodian;

409.105(2m)(d) (d) Copies or amendments that add or change an identified assignee of the authoritative copy can be made only with the consent of the secured party;

409.105(2m)(e) (e) Each copy of the authoritative copy and any copy of a copy is readily identifiable as a copy that is not the authoritative copy; and

409.105(2m)(f) (f) Any amendment of the authoritative copy is readily identifiable as authorized or unauthorized.

409.105 History History: 2001 a. 10, 416; 2011 a. 206.

409.106 409.106 Control of investment property.

409.106(1) (1) Control under s. 408.106. A person has control of a certificated security, uncertificated security, or security entitlement as provided in s. 408.106.

409.106(2) (2) Control of commodity contract. A secured party has control of a commodity contract if:

409.106(2)(a) (a) The secured party is the commodity intermediary with which the commodity contract is carried; or

409.106(2)(b) (b) The commodity customer, secured party, and commodity intermediary have agreed that the commodity intermediary will apply any value distributed on account of the commodity contract as directed by the secured party without further consent by the commodity customer.

409.106(3) (3) Effect of control of securities account or commodity account. A secured party having control of all security entitlements or commodity contracts carried in a securities account or commodity account has control over the securities account or commodity account.

409.106 History History: 2001 a. 10.

409.107 409.107 Control of letter-of-credit right. A secured party has control of a letter-of-credit right to the extent of any right to payment or performance by the issuer or any nominated person if the issuer or nominated person has consented to an assignment of proceeds of the letter of credit under ch. 405 or otherwise applicable law or practice.

409.107 History History: 2001 a. 10.

409.108 409.108 Sufficiency of description.

409.108(1) (1) Sufficiency of description. Except as otherwise provided in subs. (3) to (5), a description of personal or real property is sufficient, whether or not it is specific, if it reasonably identifies what is described.

409.108(2) (2) Examples of reasonable identification. Except as otherwise provided in sub. (4), a description of collateral reasonably identifies the collateral if it identifies the collateral by:

409.108(2)(a) (a) Specific listing;

409.108(2)(b) (b) Category;

409.108(2)(c) (c) Except as otherwise provided in sub. (5), a type of collateral defined in chs. 401 to 411;

409.108(2)(d) (d) Quantity;

409.108(2)(e) (e) Computational or allocational formula or procedure; or

409.108(2)(f) (f) Except as otherwise provided in sub. (3), any other method, if the identity of the collateral is objectively determinable.

409.108(3) (3) Supergeneric description not sufficient. A description of collateral as “all the debtor’s assets” or “all the debtor’s personal property” or using words of similar import does not reasonably identify the collateral.

409.108(4) (4) Investment property. Except as otherwise provided in sub. (5), a description of a security entitlement, securities account, or commodity account is sufficient if it describes:

409.108(4)(a) (a) The collateral by those terms or as investment property; or

409.108(4)(b) (b) The underlying financial asset or commodity contract.

409.108(5) (5) When description by type insufficient. A description only by type of collateral defined in chs. 401 to 411 is an insufficient description of:

409.108(5)(a) (a) A commercial tort claim; or

409.108(5)(b) (b) In a consumer transaction, consumer goods, a security entitlement, a securities account, or a commodity account.