Chapter 409

409.109(4)(d) (d) A sale of accounts, chattel paper, payment intangibles, or promissory notes as part of a sale of the business out of which they arose;

409.109(4)(e) (e) An assignment of accounts, chattel paper, payment intangibles, or promissory notes which is for the purpose of collection only;

409.109(4)(f) (f) An assignment of a right to payment under a contract to an assignee that is also obligated to perform under the contract;

409.109(4)(g) (g) An assignment of a single account, payment intangible, or promissory note to an assignee in full or partial satisfaction of a preexisting indebtedness;

409.109(4)(h) (h) A transfer of an interest in or an assignment of a claim under a policy of insurance, other than an assignment by or to a health-care provider of a health-care-insurance receivable and any subsequent assignment of the right to payment, but ss. 409.315 and 409.322 apply with respect to proceeds and priorities in proceeds;

409.109(4)(i) (i) An assignment of a right represented by a judgment, other than a judgment taken on a right to payment that was collateral;

409.109(4)(j) (j) A right of recoupment or setoff, but:

409.109(4)(j)1. 1. Section 409.340 applies with respect to the effectiveness of rights of recoupment or setoff against deposit accounts; and

409.109(4)(j)2. 2. Section 409.404 applies with respect to defenses or claims of an account debtor;

409.109(4)(k) (k) The creation or transfer of an interest in or lien on real property, including a lease or rents thereunder, except to the extent that provision is made for:

409.109(4)(k)1. 1. Liens on real property in ss. 409.203 and 409.308;

409.109(4)(k)2. 2. Fixtures in s. 409.334;

409.109(4)(k)3. 3. Fixture filings in ss. 409.501, 409.502, 409.512, 409.516, and 409.519; and

409.109(4)(k)4. 4. Security agreements covering personal and real property in s. 409.604;

409.109(4)(L) (L) An assignment of a claim arising in tort, other than a commercial tort claim, but ss. 409.315 and 409.322 apply with respect to proceeds and priorities in proceeds; or

409.109(4)(m) (m) An assignment of a deposit account in a consumer transaction, but ss. 409.315 and 409.322 apply with respect to proceeds and priorities in proceeds.

409.109 History History: 2001 a. 10, 64.

409.109 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.

409.110 409.110 Security interests arising under ch. 402 or 411. A security interest arising under s. 402.401, 402.505, 402.711 (3), or 411.508 (5) is subject to this chapter. However, until the debtor obtains possession of the goods:

409.110(1) (1) The security interest is enforceable, even if s. 409.203 (2) (c) has not been satisfied;

409.110(2) (2) Filing is not required to perfect the security interest;

409.110(3) (3) The rights of the secured party after default by the debtor are governed by ch. 402 or 411; and

409.110(4) (4) The security interest has priority over a conflicting security interest created by the debtor.

409.110 History History: 2001 a. 10.

subch. II of ch. 409 SUBCHAPTER II

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

409.201 409.201 General effectiveness of security agreement.

409.201(1) (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.

409.201(2) (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.

409.201(3) (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.

409.201(4) (4) Further deference to other applicable law. This chapter does not:

409.201(4)(a) (a) Validate any rate, charge, agreement, or practice that violates a rule of law, statute, or rule described in sub. (2); or

409.201(4)(b) (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.

409.201 History History: 2001 a. 10.

409.202 409.202 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.

409.202 History History: 2001 a. 10.

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).

409.202 Note NOTE: The above annotated materials cite to the pre-2001 Wis. Act 10 version of s. 409.202.

409.203 409.203 Attachment and enforceability of security interest; proceeds; supporting obligations; formal requisites.

409.203(1) (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.

409.203(2) (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:

409.203(2)(a) (a) Value has been given;

409.203(2)(b) (b) The debtor has rights in the collateral or the power to transfer rights in the collateral to a secured party; and

409.203(2)(c) (c) One of the following conditions is met:

409.203(2)(c)1. 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;

409.203(2)(c)2. 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;

409.203(2)(c)3. 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

409.203(2)(c)4. 4. The collateral is deposit accounts, electronic chattel paper, investment property, letter-of-credit rights, or electronic documents, and the secured party has control under s. 407.106, 409.104, 409.105, 409.106, or 409.107 pursuant to the debtor’s security agreement.

409.203(3) (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.

409.203(4) (4) When person becomes bound by another person’s security agreement.

409.203(4)(a) (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:

409.203(4)(a)1. 1. The security agreement becomes effective to create a security interest in the person’s property; or

409.203(4)(a)2. 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.

409.203(4)(b) (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.

409.203(5) (5) Effect of new debtor becoming bound. If a new debtor becomes bound as debtor by a security agreement entered into by another person:

409.203(5)(a) (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

409.203(5)(b) (b) Another agreement is not necessary to make a security interest in the property enforceable.

409.203(6) (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.

409.203(7) (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.

409.203(8) (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.

409.203(9) (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.

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

409.203 Annotation A provision in an instrument prohibiting transfer of the instrument did not render a security interest in the instrument unenforceable. 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), 97-2450.

409.203 Note NOTE: The above annotated materials cite to the pre-2001 Wis. Act 10 version of s. 409.203.

409.203 Annotation Sub. (7) is identical to s. 9-203 (g) of the Uniform Commercial Code. The comment to s. 9-203 (g) states, “Subsection (g) codifies the common-law rule that a transfer of an obligation secured by a security interest or other lien on personal or real property also transfers the security interest or lien” and supports the assertion that sub. (7) was intended to codify the common law doctrine of equitable assignment. It also supports the argument that the doctrine applies to real estate mortgages. Dow Family, LLC v. PHH Mortgage Corporation, 2014 WI 56, 354 Wis. 2d 796, 848 N.W.2d 728, 13-0221.

409.204 409.204 After-acquired property; future advances.

409.204(1) (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.

409.204(2) (2) When after-acquired property clause not effective. A security interest does not attach under a term constituting an after-acquired property clause to:

409.204(2)(a) (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

409.204(2)(b) (b) A commercial tort claim.

409.204(3) (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.

409.204 History History: 2001 a. 10.

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.

409.204 Note NOTE: The above annotated materials cite to the pre-2001 Wis. Act 10 version of s. 409.204.

409.205 409.205 Use or disposition of collateral permissible.

409.205(1) (1) When security interest not invalid or fraudulent. A security interest is not invalid or fraudulent against creditors solely because:

409.205(1)(a) (a) The debtor has the right or ability to:

409.205(1)(a)1. 1. Use, commingle, or dispose of all or part of the collateral, including returned or repossessed goods;

409.205(1)(a)2. 2. Collect, compromise, enforce, or otherwise deal with collateral;

409.205(1)(a)3. 3. Accept the return of collateral or make repossessions; or

409.205(1)(a)4. 4. Use, commingle, or dispose of proceeds; or

409.205(1)(b) (b) The secured party fails to require the debtor to account for proceeds or replace collateral.

409.205(2) (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.

409.205 History History: 2001 a. 10.

409.205 Annotation Under this section 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 is 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 or her 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).

409.205 Note NOTE: The above annotated materials cite to the pre-2001 Wis. Act 10 version of s. 409.205.