Chapter 409

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.

409.326(2) (2) Priority under other provisions; multiple original debtors. The other provisions of this subchapter determine the priority among conflicting security interests in the same collateral perfected by filed financing statements described in sub. (1). However, if the security agreements to which a new debtor became bound as debtor were not entered into by the same original debtor, the conflicting security interests rank according to priority in time of the new debtor’s having become bound.

409.326 History History: 2001 a. 10; 2011 a. 206.

409.327 409.327 Priority of security interests in deposit account. The following rules govern priority among conflicting security interests in the same deposit account:

409.327(1) (1) Control by secured party. A security interest held by a secured party having control of the deposit account under s. 409.104 has priority over a conflicting security interest held by a secured party that does not have control.

409.327(2) (2) Priority in time of control. Except as otherwise provided in subs. (3) and (4), security interests perfected by control under s. 409.314 rank according to priority in time of obtaining control.

409.327(3) (3) Priority of bank regarding deposit account. Except as otherwise provided in sub. (4), a security interest held by the bank with which the deposit account is maintained has priority over a conflicting security interest held by another secured party.

409.327(4) (4) Priority over bank regarding deposit account. A security interest perfected by control under s. 409.104 (1) (c) has priority over a security interest held by the bank with which the deposit account is maintained.

409.327 History History: 2001 a. 10.

409.328 409.328 Priority of security interests in investment property. The following rules govern priority among conflicting security interests in the same investment property:

409.328(1) (1) Control by secured party. A security interest held by a secured party having control of investment property under s. 409.106 has priority over a security interest held by a secured party that does not have control of the investment property.

409.328(2) (2) Priority in time of control. Except as otherwise provided in subs. (3) and (4), conflicting security interests held by secured parties each of which has control under s. 409.106 rank according to priority in time of:

409.328(2)(a) (a) If the collateral is a security, obtaining control;

409.328(2)(b) (b) If the collateral is a security entitlement carried in a securities account and:

409.328(2)(b)1. 1. If the secured party obtained control under s. 408.106 (4) (a), the secured party’s becoming the person for which the securities account is maintained;

409.328(2)(b)2. 2. If the secured party obtained control under s. 408.106 (4) (b), the securities intermediary’s agreement to comply with the secured party’s entitlement orders with respect to security entitlements carried or to be carried in the securities account; or

409.328(2)(b)3. 3. If the secured party obtained control through another person under s. 408.106 (4) (c), the time on which priority would be based under this subsection if the other person were the secured party; or

409.328(2)(c) (c) If the collateral is a commodity contract carried with a commodity intermediary, the satisfaction of the requirement for control specified in s. 409.106 (2) (b) with respect to commodity contracts carried or to be carried with the commodity intermediary.

409.328(3) (3) Priority of securities intermediary regarding entitlement or account. A security interest held by a securities intermediary in a security entitlement or a securities account maintained with the securities intermediary has priority over a conflicting security interest held by another secured party.

409.328(4) (4) Priority of securities intermediary regarding contract or account. A security interest held by a commodity intermediary in a commodity contract or a commodity account maintained with the commodity intermediary has priority over a conflicting security interest held by another secured party.

409.328(5) (5) Priority in certificated securities. A security interest in a certificated security in registered form which is perfected by taking delivery under s. 409.313 (1) and not by control under s. 409.314 has priority over a conflicting security interest perfected by a method other than control.

409.328(6) (6) Priority of conflicting security interests; intermediaries. Conflicting security interests created by a broker, securities intermediary, or commodity intermediary which are perfected without control under s. 409.106 rank equally.

409.328(7) (7) Priority of conflicting security interests; others. In all other cases, priority among conflicting security interests in investment property is governed by ss. 409.322 and 409.323.

409.328 History History: 2001 a. 10.

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.