Chapter 409

409.322(1) (1) General priority rules. Except as otherwise provided in this section, priority among conflicting security interests and agricultural liens in the same collateral is determined according to the following rules:

409.322(1)(a) (a) Conflicting perfected security interests and agricultural liens rank according to priority in time of filing or perfection. Priority dates from the earlier of the time a filing covering the collateral is first made or the security interest or agricultural lien is first perfected, if there is no period thereafter when there is neither filing nor perfection.

409.322(1)(b) (b) A perfected security interest or agricultural lien has priority over a conflicting unperfected security interest or agricultural lien.

409.322(1)(c) (c) The first security interest or agricultural lien to attach or become effective has priority if conflicting security interests and agricultural liens are unperfected.

409.322(2) (2) Time of perfection: proceeds and supporting obligations. For the purposes of sub. (1) (a):

409.322(2)(a) (a) The time of filing or perfection as to a security interest in collateral is also the time of filing or perfection as to a security interest in proceeds; and

409.322(2)(b) (b) The time of filing or perfection as to a security interest in collateral supported by a supporting obligation is also the time of filing or perfection as to a security interest in the supporting obligation.

409.322(3) (3) Special priority rules: proceeds and supporting obligations. Except as otherwise provided in sub. (6), a security interest in collateral which qualifies for priority over a conflicting security interest under s. 409.327, 409.328, 409.329, 409.330, or 409.331 also has priority over a conflicting security interest in:

409.322(3)(a) (a) Any supporting obligation for the collateral; and

409.322(3)(b) (b) Proceeds of the collateral if:

409.322(3)(b)1. 1. The security interest in proceeds is perfected;

409.322(3)(b)2. 2. The proceeds are cash proceeds or of the same type as the collateral; and

409.322(3)(b)3. 3. In the case of proceeds that are proceeds of proceeds, all intervening proceeds are cash proceeds, proceeds of the same type as the collateral, or an account relating to the collateral.

409.322(4) (4) First-to-file priority rule for certain collateral. Subject to sub. (5) and except as otherwise provided in sub. (6), if a security interest in chattel paper, deposit accounts, negotiable documents, instruments, investment property, or letter-of-credit rights is perfected by a method other than filing, conflicting perfected security interests in proceeds of the collateral rank according to priority in time of filing.

409.322(5) (5) Applicability of sub. (4). Subsection (4) applies only if the proceeds of the collateral are not cash proceeds, chattel paper, negotiable documents, instruments, investment property, or letter-of-credit rights.

409.322(6) (6) Limitations on subs. (1) to (5). Subsections (1) to (5) are subject to:

409.322(6)(a) (a) Subsection (7) and the other provisions of this subchapter;

409.322(6)(b) (b) Section 404.210 with respect to a security interest of a collecting bank;

409.322(6)(c) (c) Section 405.118 with respect to a security interest of an issuer or nominated person; and

409.322(6)(d) (d) Section 409.110 with respect to a security interest arising under ch. 402 or 411.

409.322(7) (7) Priority under agricultural lien statute. A perfected agricultural lien on collateral has priority over a conflicting security interest in or agricultural lien on the same collateral if the statute creating the agricultural lien so provides.

409.322 History History: 2001 a. 10.

409.322 Annotation A bank with a security interest perfected by filing a financing statements had priority over a chattel mortgage that was filed almost 2 years after the bank filed its financing statements, even though the bank subsequently refiled a financing statement. Burlington National Bank v. Strauss, 50 Wis. 2d 270, 184 N.W.2d 122 (1971).

409.322 Annotation A seller of goods on credit must perfect its claim to priority by filing the agreement and financing statements. House of Stainless, Inc. v. Marshall & Ilsley Bank, 75 Wis. 2d 264, 249 N.W.2d 561 (1977).

409.322 Annotation A lien creditor has 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).

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

409.323 409.323 Future advances.

409.323(1) (1) When priority based on time of advance. Except as otherwise provided in sub. (3), for purposes of determining the priority of a perfected security interest under s. 409.322 (1) (a), perfection of the security interest dates from the time an advance is made to the extent that the security interest secures an advance that:

409.323(1)(a) (a) Is made while the security interest is perfected only:

409.323(1)(a)1. 1. Under s. 409.309 when it attaches; or

409.323(1)(a)2. 2. Temporarily under s. 409.312 (5), (6), or (7); and

409.323(1)(b) (b) Is not made pursuant to a commitment entered into before or while the security interest is perfected by a method other than under s. 409.309 or 409.312 (5), (6), or (7).

409.323(2) (2) Lien creditor. Except as otherwise provided in sub. (3), a security interest is subordinate to the rights of a person that becomes a lien creditor to the extent that the security interest secures an advance made more than 45 days after the person becomes a lien creditor unless the advance is made:

409.323(2)(a) (a) Without knowledge of the lien; or

409.323(2)(b) (b) Pursuant to a commitment entered into without knowledge of the lien.

409.323(3) (3) Buyer of receivables. Subsections (1) and (2) do not apply to a security interest held by a secured party that is a buyer of accounts, chattel paper, payment intangibles, or promissory notes or a consignor.

409.323(4) (4) Buyer of goods. Except as otherwise provided in sub. (5), a buyer of goods other than a buyer in ordinary course of business takes free of a security interest to the extent that it secures advances made after the earlier of:

409.323(4)(a) (a) The time the secured party acquires knowledge of the buyer’s purchase; or

409.323(4)(b) (b) Forty-five days after the purchase.

409.323(5) (5) Advances made pursuant to commitment: priority of buyer of goods. Subsection (4) does not apply if the advance is made pursuant to a commitment entered into without knowledge of the buyer’s purchase and before the expiration of the 45-day period.

409.323(6) (6) Lessee of goods. Except as otherwise provided in sub. (7), a lessee of goods, other than a lessee in ordinary course of business, takes the leasehold interest free of a security interest to the extent that it secures advances made after the earlier of:

409.323(6)(a) (a) The time the secured party acquires knowledge of the lease; or

409.323(6)(b) (b) Forty-five days after the lease contract becomes enforceable.

409.323(7) (7) Advances made pursuant to commitment: priority of lessee of goods. Subsection (6) does not apply if the advance is made pursuant to a commitment entered into without knowledge of the lease and before the expiration of the 45-day period.

409.323 History History: 2001 a. 10.

409.324 409.324 Priority of purchase-money security interests.

409.324(1) (1) General rule: purchase-money priority. Except as otherwise provided in sub. (7), a perfected purchase-money security interest in goods other than inventory or livestock has priority over a conflicting security interest in the same goods, and, except as otherwise provided in s. 409.327, a perfected security interest in its identifiable proceeds also has priority, if the purchase-money security interest is perfected when the debtor receives possession of the collateral or within 20 days thereafter.

409.324(2) (2) Inventory purchase-money priority. Subject to sub. (3) and except as otherwise provided in sub. (7), a perfected purchase-money security interest in inventory has priority over a conflicting security interest in the same inventory, has priority over a conflicting security interest in chattel paper or an instrument constituting proceeds of the inventory and in proceeds of the chattel paper, if so provided in s. 409.330, and, except as otherwise provided in s. 409.327, also has priority in identifiable cash proceeds of the inventory to the extent that the identifiable cash proceeds are received on or before the delivery of the inventory to a buyer, if:

409.324(2)(a) (a) The purchase-money security interest is perfected when the debtor receives possession of the inventory;

409.324(2)(b) (b) The purchase-money secured party sends an authenticated notification to the holder of the conflicting security interest;

409.324(2)(c) (c) The holder of the conflicting security interest receives the notification within 5 years before the debtor receives possession of the inventory; and

409.324(2)(d) (d) The notification states that the person sending the notification has or expects to acquire a purchase-money security interest in inventory of the debtor and describes the inventory.

409.324(3) (3) Holders of conflicting inventory security interests to be notified. Subsection (2) (b) to (d) applies only if the holder of the conflicting security interest had filed a financing statement covering the same types of inventory:

409.324(3)(a) (a) If the purchase-money security interest is perfected by filing, before the date of the filing; or

409.324(3)(b) (b) If the purchase-money security interest is temporarily perfected without filing or possession under s. 409.312 (6), before the beginning of the 20-day period thereunder.

409.324(4) (4) Livestock purchase-money priority. Subject to sub. (5) and except as otherwise provided in sub. (7), a perfected purchase-money security interest in livestock that are farm products has priority over a conflicting security interest in the same livestock, and, except as otherwise provided in s. 409.327, a perfected security interest in their identifiable proceeds and identifiable products in their unmanufactured states also has priority, if:

409.324(4)(a) (a) The purchase-money security interest is perfected when the debtor receives possession of the livestock;

409.324(4)(b) (b) The purchase-money secured party sends an authenticated notification to the holder of the conflicting security interest;

409.324(4)(c) (c) The holder of the conflicting security interest receives the notification within 6 months before the debtor receives possession of the livestock; and

409.324(4)(d) (d) The notification states that the person sending the notification has or expects to acquire a purchase-money security interest in livestock of the debtor and describes the livestock.

409.324(5) (5) Holders of conflicting livestock security interests to be notified. Subsection (4) (b) to (d) applies only if the holder of the conflicting security interest had filed a financing statement covering the same types of livestock:

409.324(5)(a) (a) If the purchase-money security interest is perfected by filing, before the date of the filing; or

409.324(5)(b) (b) If the purchase-money security interest is temporarily perfected without filing or possession under s. 409.312 (6), before the beginning of the 20-day period thereunder.

409.324(6) (6) Software purchase-money priority. Except as otherwise provided in sub. (7), a perfected purchase-money security interest in software has priority over a conflicting security interest in the same collateral, and, except as otherwise provided in s. 409.327, a perfected security interest in its identifiable proceeds also has priority, to the extent that the purchase-money security interest in the goods in which the software was acquired for use has priority in the goods and proceeds of the goods under this section.

409.324(7) (7) Conflicting purchase-money security interests. If more than one security interest qualifies for priority in the same collateral under sub. (1), (2), (4), or (6):

409.324(7)(a) (a) A security interest securing an obligation incurred as all or part of the price of the collateral has priority over a security interest securing an obligation incurred for value given to enable the debtor to acquire rights in or the use of collateral; and

409.324(7)(b) (b) In all other cases, s. 409.322 (1) applies to the qualifying security interests.

409.324 History History: 2001 a. 10.

409.3245 409.3245 Priority of production-money security interests and agricultural liens.

409.3245(1) (1) Except as otherwise provided in subs. (3), (4), and (5), if the requirements of sub. (2) are satisfied, a perfected production-money security interest in production-money crops has priority over a conflicting security interest in the same crops to the extent of the production-money obligation secured by the production-money security interest and, except as otherwise provided in s. 409.327, also has priority in their identifiable proceeds.

409.3245(2) (2) A production-money security interest has priority under sub. (1) if:

409.3245(2)(a) (a) The production-money security interest is perfected by filing when the production-money secured party first gives new value to enable the debtor to produce the crops;

409.3245(2)(b) (b) The production-money secured party sends an authenticated notification by certified mail to the holder of the conflicting security interest not less than 20 or more than 30 days before the production-money secured party first gives new value to enable the debtor to produce the crops if the holder had filed a financing statement covering the crops before the date of the filing made by the production-money secured party; and

409.3245(2)(c) (c) The notification states that the production-money secured party has or expects to acquire a production-money security interest in the debtor’s crops and provides a description of the crops, the name and mailing address of the production-money secured party giving the notice, the name and mailing address of the debtor, the name and mailing address of the lender to whom notice is being sent, the date on which the transaction would take place, and the maximum amount of new value to be provided.

409.3245(3) (3) Except as otherwise provided in sub. (4) or (5), if more than one security interest qualifies for priority in the same collateral under sub. (1), the security interests rank according to priority in time of filing under s. 409.322 (1).

409.3245(4) (4) To the extent that a person holding a perfected security interest in production-money crops that are the subject of a production-money security interest gives new value to enable the debtor to produce the production-money crops and the value is in fact used for the production of the production-money crops, the security interests rank according to priority in time of filing under s. 409.322 (1).

409.3245(5) (5) To the extent that a person holds both an agricultural lien and a production-money security interest in the same collateral securing the same obligations, the rules of priority applicable to agricultural liens govern priority.

409.3245 History History: 2001 a. 10.

409.325 409.325 Priority of security interests in transferred collateral.

409.325(1) (1) Subordination of security interest in transferred collateral. Except as otherwise provided in sub. (2), a security interest created by a debtor is subordinate to a security interest in the same collateral created by another person if:

409.325(1)(a) (a) The debtor acquired the collateral subject to the security interest created by the other person;

409.325(1)(b) (b) The security interest created by the other person was perfected when the debtor acquired the collateral; and

409.325(1)(c) (c) There is no period thereafter when the security interest is unperfected.

409.325(2) (2) Limitation of sub. (1) subordination. Subsection (1) subordinates a security interest only if the security interest:

409.325(2)(a) (a) Otherwise would have priority solely under s. 409.322 (1) or 409.324; or

409.325(2)(b) (b) Arose solely under s. 402.711 (3) or 411.508 (5).

409.325 History History: 2001 a. 10.

409.326 409.326 Priority of security interests created by new debtor.

409.326(1) (1) Subordination of security interest created by new debtor. Subject to sub. (2), a security interest that is created by a new debtor in collateral in which the new debtor has or acquires rights and is perfected solely by a filed financing statement that would be ineffective to perfect the security interest but for the application of s. 409.316 (9) (a) or 409.508 is subordinate to a security interest in the same collateral which is perfected other than by such a filed financing statement.