Chapter 409

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.

409.206 409.206 Security interest arising in purchase or delivery of financial asset.

409.206(1) (1) Security interest when person buys through securities intermediary. A security interest in favor of a securities intermediary attaches to a person’s security entitlement if:

409.206(1)(a) (a) The person buys a financial asset through the securities intermediary in a transaction in which the person is obligated to pay the purchase price to the securities intermediary at the time of the purchase; and

409.206(1)(b) (b) The securities intermediary credits the financial asset to the buyer’s securities account before the buyer pays the securities intermediary.

409.206(2) (2) Security interest secures obligation to pay for financial asset. The security interest described in sub. (1) secures the person’s obligation to pay for the financial asset.

409.206(3) (3) Security interest in payment against delivery transaction. A security interest in favor of a person that delivers a certificated security or other financial asset represented by a writing attaches to the security or other financial asset if:

409.206(3)(a) (a) The security or other financial asset:

409.206(3)(a)1. 1. In the ordinary course of business is transferred by delivery with any necessary endorsement or assignment; and

409.206(3)(a)2. 2. Is delivered under an agreement between persons in the business of dealing with such securities or financial assets; and

409.206(3)(b) (b) The agreement calls for delivery against payment.

409.206(4) (4) Security interest secures obligation to pay for delivery. The security interest described in sub. (3) secures the obligation to make payment for the delivery.

409.206 History History: 2001 a. 10.

409.207 409.207 Rights and duties of secured party having possession or control of collateral.

409.207(1) (1) Duty of care when secured party in possession. Except as otherwise provided in sub. (4), a secured party shall use reasonable care in the custody and preservation of collateral in the secured party’s possession. In the case of chattel paper or an instrument, reasonable care includes taking necessary steps to preserve rights against prior parties unless otherwise agreed.

409.207(2) (2) Expenses, risks, duties, and rights when secured party in possession. Except as otherwise provided in sub. (4), if a secured party has possession of collateral:

409.207(2)(a) (a) Reasonable expenses, including the cost of 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 a deficiency in any effective insurance coverage;

409.207(2)(c) (c) The secured party shall keep the collateral identifiable, but fungible collateral may be commingled; and

409.207(2)(d) (d) The secured party may use or operate the collateral:

409.207(2)(d)1. 1. For the purpose of preserving the collateral or its value;

409.207(2)(d)2. 2. As permitted by an order of a court having competent jurisdiction; or

409.207(2)(d)3. 3. Except in the case of consumer goods, in the manner and to the extent agreed by the debtor.

409.207(3) (3) Duties and rights when secured party in possession or control. Except as otherwise provided in sub. (4), a secured party having possession of collateral or control of collateral under s. 407.106, 409.104, 409.105, 409.106, or 409.107:

409.207(3)(a) (a) May hold as additional security any proceeds, except money or funds, received from the collateral;

409.207(3)(b) (b) Shall apply money or funds received from the collateral to reduce the secured obligation, unless remitted to the debtor; and

409.207(3)(c) (c) May create a security interest in the collateral.

409.207(4) (4) Buyer of certain rights to payment. If the secured party is a buyer of accounts, chattel paper, payment intangibles, or promissory notes or a consignor:

409.207(4)(a) (a) Subsection (1) does not apply unless the secured party is entitled under an agreement:

409.207(4)(a)1. 1. To charge back uncollected collateral; or

409.207(4)(a)2. 2. Otherwise to full or limited recourse against the debtor or a secondary obligor based on the nonpayment or other default of an account debtor or other obligor on the collateral; and

409.207(4)(b) (b) Subsections (1) and (2) do not apply.

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

409.207 Annotation [Former] 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 [former] sub. (2) (c). Demotropoulous v. Bank One Milwaukee, N.A. 953 F. Supp. 974 (1997).

409.207 Annotation [Former] sub. (2) (c) requiring the application of increase or profits received by a secured property on property held as collateral did not apply to a security deposit paid on a car lease. Doe v. General Motors Acceptance Corporation, 2001 WI App 199, 247 Wis. 2d 564, 635 N.W.2d 7, 00-1564.

409.207 Note NOTE: The above annotated materials cite to the pre-2001 Wis. Act 10 version of s. 409.207.

409.208 409.208 Additional duties of secured party having control of collateral.

409.208(1) (1) Applicability of section. This section applies to cases in which there is no outstanding secured obligation and the secured party is not committed to make advances, incur obligations, or otherwise give value.

409.208(2) (2) Duties of secured party after receiving demand from debtor. Within 10 days after receiving an authenticated demand by the debtor:

409.208(2)(a) (a) A secured party having control of a deposit account under s. 409.104 (1) (b) shall send to the bank with which the deposit account is maintained an authenticated statement that releases the bank from any further obligation to comply with instructions originated by the secured party;

409.208(2)(b) (b) A secured party having control of a deposit account under s. 409.104 (1) (c) shall:

409.208(2)(b)1. 1. Pay the debtor the balance on deposit in the deposit account; or

409.208(2)(b)2. 2. Transfer the balance on deposit into a deposit account in the debtor’s name;

409.208(2)(c) (c) A secured party, other than a buyer, having control of electronic chattel paper under s. 409.105 shall:

409.208(2)(c)1. 1. Communicate the authoritative copy of the electronic chattel paper to the debtor or its designated custodian;

409.208(2)(c)2. 2. If the debtor designates a custodian that is the designated custodian with which the authoritative copy of the electronic chattel paper is maintained for the secured party, communicate to the custodian an authenticated record releasing the designated custodian from any further obligation to comply with instructions originated by the secured party and instructing the custodian to comply with instructions originated by the debtor; and

409.208(2)(c)3. 3. Take appropriate action to enable the debtor or its designated custodian to make copies of or revisions to the authoritative copy which add or change an identified assignee of the authoritative copy without the consent of the secured party;

409.208(2)(d) (d) A secured party having control of investment property under s. 408.106 (4) (b) or 409.106 (2) shall send to the securities intermediary or commodity intermediary with which the security entitlement or commodity contract is maintained an authenticated record that releases the securities intermediary or commodity intermediary from any further obligation to comply with entitlement orders or directions originated by the secured party;

409.208(2)(e) (e) A secured party having control of a letter-of-credit right under s. 409.107 shall send to each person having an unfulfilled obligation to pay or deliver proceeds of the letter of credit to the secured party an authenticated release from any further obligation to pay or deliver proceeds of the letter of credit to the secured party; and

409.208(2)(f) (f) A secured party having control of an electronic document shall do all of the following:

409.208(2)(f)1. 1. Give control of the electronic document to the debtor or its designated custodian.

409.208(2)(f)2. 2. If the debtor designates a custodian that is the designated custodian with which the authoritative copy of the electronic document is maintained for the secured party, communicate to the custodian an authenticated record releasing the designated custodian from any further obligation to comply with instructions originated by the secured party and instructing the custodian to comply with instructions originated by the debtor.

409.208(2)(f)3. 3. Take appropriate action to enable the debtor or its designated custodian to make copies of or revisions to the authoritative copy which add or change an identified assignee of the authoritative copy without the consent of the secured party.

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

409.209 409.209 Duties of secured party if account debtor has been notified of assignment.

409.209(1) (1) Applicability of section. Except as otherwise provided in sub. (3), this section applies if:

409.209(1)(a) (a) There is no outstanding secured obligation; and

409.209(1)(b) (b) The secured party is not committed to make advances, incur obligations, or otherwise give value.

409.209(2) (2) Duties of secured party after receiving demand from debtor. Within 10 days after receiving an authenticated demand by the debtor, a secured party shall send to an account debtor that has received notification of an assignment to the secured party as assignee under s. 409.406 (1) an authenticated record that releases the account debtor from any further obligation to the secured party.

409.209(3) (3) Inapplicability to sales. This section does not apply to an assignment constituting the sale of an account, chattel paper, or payment intangible.

409.209 History History: 2001 a. 10.

409.210 409.210 Request for accounting; request regarding list of collateral or statement of account.

409.210(1) (1) Definitions. In this section:

409.210(1)(a) (a) “Request” means a record of a type described in par. (b), (c), or (d).

409.210(1)(b) (b) “Request for an accounting” means a record authenticated by a debtor requesting that the recipient provide an accounting of the unpaid obligations secured by collateral and reasonably identifying the transaction or relationship that is the subject of the request.

409.210(1)(c) (c) “Request regarding a list of collateral” means a record authenticated by a debtor requesting that the recipient approve or correct a list of what the debtor believes to be the collateral securing an obligation and reasonably identifying the transaction or relationship that is the subject of the request.

409.210(1)(d) (d) “Request regarding a statement of account” means a record authenticated by a debtor requesting that the recipient approve or correct a statement indicating what the debtor believes to be the aggregate amount of unpaid obligations secured by collateral as of a specified date and reasonably identifying the transaction or relationship that is the subject of the request.

409.210(2) (2) Duty to respond to requests. Subject to subs. (3) to (6), a secured party, other than a buyer of accounts, chattel paper, payment intangibles, or promissory notes or a consignor, shall comply with a request within 14 days after receipt:

409.210(2)(a) (a) In the case of a request for an accounting, by authenticating and sending to the debtor an accounting; and

409.210(2)(b) (b) In the case of a request regarding a list of collateral or a request regarding a statement of account, by authenticating and sending to the debtor an approval or correction.

409.210(3) (3) Request regarding list of collateral; statement concerning type of collateral. A secured party that claims a security interest in all of a particular type of collateral owned by the debtor may comply with a request regarding a list of collateral by sending to the debtor an authenticated record including a statement to that effect within 14 days after receipt.

409.210(4) (4) Request regarding list of collateral; no interest claimed. A person that receives a request regarding a list of collateral, claims no interest in the collateral when it receives the request, and claimed an interest in the collateral at an earlier time shall comply with the request within 14 days after receipt by sending to the debtor an authenticated record:

409.210(4)(a) (a) Disclaiming any interest in the collateral; and

409.210(4)(b) (b) If known to the recipient, providing the name and mailing address of any assignee of or successor to the recipient’s interest in the collateral.

409.210(5) (5) Request for accounting or regarding statement of account; no interest in obligation claimed. A person that receives a request for an accounting or a request regarding a statement of account, claims no interest in the obligations when it receives the request, and claimed an interest in the obligations at an earlier time shall comply with the request within 14 days after receipt by sending to the debtor an authenticated record:

409.210(5)(a) (a) Disclaiming any interest in the obligations; and

409.210(5)(b) (b) If known to the recipient, providing the name and mailing address of any assignee of or successor to the recipient’s interest in the obligations.

409.210(6) (6) Charges for responses. A debtor is entitled without charge to one response to a request under this section during any 6-month period. The secured party may require payment of a charge not exceeding $25 for each additional response.

409.210 History History: 2001 a. 10.

subch. III of ch. 409 SUBCHAPTER III

PERFECTION AND PRIORITY

409.301 409.301 Law governing perfection and priority of security interests. Except as otherwise provided in ss. 409.303 to 409.306, the following rules determine the law governing perfection, the effect of perfection or nonperfection, and the priority of a security interest in collateral:

409.301(1) (1) Location of debtor. Except as otherwise provided in this section, while a debtor is located in a jurisdiction, the local law of that jurisdiction governs perfection, the effect of perfection or nonperfection, and the priority of a security interest in collateral.

409.301(2) (2) Location of collateral. While collateral is located in a jurisdiction, the local law of that jurisdiction governs perfection, the effect of perfection or nonperfection, and the priority of a possessory security interest in that collateral.

409.301(3) (3) Location of property. Except as otherwise provided in sub. (4), while tangible negotiable documents, goods, instruments, money, or tangible chattel paper is located in a jurisdiction, the local law of that jurisdiction governs: