Chapter 409

409.615(1) (1) Application of proceeds. A secured party shall apply or pay over for application the cash proceeds of disposition under s. 409.610 in the following order to:

409.615(1)(a) (a) The reasonable expenses of retaking, holding, preparing for disposition, processing, and disposing of, and, to the extent provided for by agreement and not prohibited by law, reasonable attorney fees and legal expenses incurred by the secured party;

409.615(1)(b) (b) The satisfaction of obligations secured by the security interest or agricultural lien under which the disposition is made;

409.615(1)(c) (c) The satisfaction of obligations secured by any subordinate security interest in or other subordinate lien on the collateral if:

409.615(1)(c)1. 1. The secured party receives from the holder of the subordinate security interest or other lien an authenticated demand for proceeds before distribution of the proceeds is completed; and

409.615(1)(c)2. 2. In a case in which a consignor has an interest in the collateral, the subordinate security interest or other lien is senior to the interest of the consignor; and

409.615(1)(d) (d) A secured party that is a consignor of the collateral if the secured party receives from the consignor an authenticated demand for proceeds before distribution of the proceeds is completed.

409.615(2) (2) Proof of subordinate interest. If requested by a secured party, a holder of a subordinate security interest or other lien shall furnish reasonable proof of the interest or lien within a reasonable time. Unless the holder does so, the secured party need not comply with the holder’s demand under sub. (1) (c).

409.615(3) (3) Application of noncash proceeds. A secured party need not apply or pay over for application noncash proceeds of disposition under s. 409.610 unless the failure to do so would be commercially unreasonable. A secured party that applies or pays over for application noncash proceeds shall do so in a commercially reasonable manner.

409.615(4) (4) Surplus or deficiency if obligation secured. If the security interest under which a disposition is made secures payment or performance of an obligation, after making the payments and applications required by sub. (1) and permitted by sub. (3):

409.615(4)(a) (a) Unless sub. (1) (d) requires the secured party to apply or pay over cash proceeds to a consignor, the secured party shall account to and pay a debtor for any surplus; and

409.615(4)(b) (b) The obligor is liable for any deficiency.

409.615(5) (5) No surplus or deficiency in sales of certain rights to payment. If the underlying transaction is a sale of accounts, chattel paper, payment intangibles, or promissory notes:

409.615(5)(a) (a) The debtor is not entitled to any surplus; and

409.615(5)(b) (b) The obligor is not liable for any deficiency.

409.615(6) (6) Calculation of surplus or deficiency in disposition to person related to secured party. The surplus or deficiency following a disposition is calculated based on the amount of proceeds that would have been realized in a disposition complying with this subchapter to a transferee other than the secured party, a person related to the secured party or a secondary obligor if:

409.615(6)(a) (a) The transferee in the disposition is the secured party, a person related to the secured party, or a secondary obligor; and

409.615(6)(b) (b) The amount of proceeds of the disposition is significantly below the range of proceeds that a complying disposition to a person other than the secured party, a person related to the secured party, or a secondary obligor would have brought.

409.615(7) (7) Cash proceeds received by junior secured party. A secured party that receives cash proceeds of a disposition in good faith and without knowledge that the receipt violates the rights of the holder of a security interest or other lien that is not subordinate to the security interest or agricultural lien under which the disposition is made:

409.615(7)(a) (a) Takes the cash proceeds free of the security interest or other lien;

409.615(7)(b) (b) Is not obligated to apply the proceeds of the disposition to the satisfaction of obligations secured by the security interest or other lien; and

409.615(7)(c) (c) Is not obligated to account to or pay the holder of the security interest or other lien for any surplus.

409.615 History History: 2001 a. 10.

409.616 409.616 Explanation of calculation of surplus or deficiency.

409.616(1) (1) Definitions. In this section:

409.616(1)(a) (a) “Explanation” means a writing that:

409.616(1)(a)1. 1. States the amount of the surplus or deficiency;

409.616(1)(a)2. 2. Provides an explanation in accordance with sub. (3) of how the secured party calculated the surplus or deficiency;

409.616(1)(a)3. 3. States, if applicable, that future debits, credits, charges, including additional credit service charges or interest, rebates, and expenses may affect the amount of the surplus or deficiency; and

409.616(1)(a)4. 4. Provides a telephone number or mailing address from which additional information concerning the transaction is available.

409.616(1)(b) (b) “Request” means a record:

409.616(1)(b)1. 1. Authenticated by a debtor or consumer obligor;

409.616(1)(b)2. 2. Requesting that the recipient provide an explanation; and

409.616(1)(b)3. 3. Sent after disposition of the collateral under s. 409.610.

409.616(2) (2) Explanation of calculation. In a consumer-goods transaction in which the debtor is entitled to a surplus or a consumer obligor is liable for a deficiency under s. 409.615, the secured party shall:

409.616(2)(a) (a) Send an explanation to the debtor or consumer obligor, as applicable, after the disposition and:

409.616(2)(a)1. 1. Before or when the secured party accounts to the debtor and pays any surplus or first makes written demand on the consumer obligor after the disposition for payment of the deficiency; and

409.616(2)(a)2. 2. Within 14 days after receipt of a request; or

409.616(2)(b) (b) In the case of a consumer obligor who is liable for a deficiency, within 14 days after receipt of a request, send to the consumer obligor a record waiving the secured party’s right to a deficiency.

409.616(3) (3) Required information. To comply with sub. (1) (a) 2., a writing must provide the following information in the following order:

409.616(3)(a) (a) The aggregate amount of obligations secured by the security interest under which the disposition was made, and, if the amount reflects a rebate of unearned interest or credit service charge, an indication of that fact, calculated as of a specified date:

409.616(3)(a)1. 1. If the secured party takes or receives possession of the collateral after default, not more than 35 days before the secured party takes or receives possession; or

409.616(3)(a)2. 2. If the secured party takes or receives possession of the collateral before default or does not take possession of the collateral, not more than 35 days before the disposition;

409.616(3)(b) (b) The amount of proceeds of the disposition;

409.616(3)(c) (c) The aggregate amount of the obligations after deducting the amount of proceeds;

409.616(3)(d) (d) The amount, in the aggregate or by type, and types of expenses, including expenses of retaking, holding, preparing for disposition, processing, and disposing of the collateral, and attorney fees secured by the collateral which are known to the secured party and relate to the current disposition;

409.616(3)(e) (e) The amount, in the aggregate or by type, and types of credits, including rebates of interest or credit service charges, to which the obligor is known to be entitled and which are not reflected in the amount in par. (a); and

409.616(3)(f) (f) The amount of the surplus or deficiency.

409.616(4) (4) Substantial compliance. A particular phrasing of the explanation is not required. An explanation complying substantially with the requirements of sub. (1) is sufficient, even if it includes minor errors that are not seriously misleading.

409.616(5) (5) Charges for responses. A debtor or consumer obligor is entitled without charge to one response to a request under this section during any 6-month period in which the secured party did not send to the debtor or consumer obligor an explanation pursuant to sub. (2) (a). The secured party may require payment of a charge not exceeding $25 for each additional response.

409.616 History History: 2001 a. 10.

409.617 409.617 Rights of transferee of collateral.

409.617(1) (1) Effects of disposition. A secured party’s disposition of collateral after default:

409.617(1)(a) (a) Transfers to a transferee for value all of the debtor’s rights in the collateral;

409.617(1)(b) (b) Discharges the security interest under which the disposition is made; and

409.617(1)(c) (c) Discharges any subordinate security interest or other subordinate lien.

409.617(2) (2) Rights of good-faith transferee. A transferee that acts in good faith takes free of the rights and interests described in sub. (1), even if the secured party fails to comply with this chapter or the requirements of any judicial proceeding.

409.617(3) (3) Rights of other transferee. If a transferee does not take free of the rights and interests described in sub. (1), the transferee takes the collateral subject to:

409.617(3)(a) (a) The debtor’s rights in the collateral;

409.617(3)(b) (b) The security interest or agricultural lien under which the disposition is made; and

409.617(3)(c) (c) Any other security interest or other lien.

409.617 History History: 2001 a. 10; 2003 a. 63.

409.618 409.618 Rights and duties of certain secondary obligors.

409.618(1) (1) Rights and duties of secondary obligor. A secondary obligor acquires the rights and becomes obligated to perform the duties of the secured party after the secondary obligor:

409.618(1)(a) (a) Receives an assignment of a secured obligation from the secured party;

409.618(1)(b) (b) Receives a transfer of collateral from the secured party and agrees to accept the rights and assume the duties of the secured party; or

409.618(1)(c) (c) Is subrogated to the rights of a secured party with respect to collateral.

409.618(2) (2) Effect of assignment, transfer, or subrogation. An assignment, transfer, or subrogation described in sub. (1):

409.618(2)(a) (a) Is not a disposition of collateral under s. 409.610; and

409.618(2)(b) (b) Relieves the secured party of further duties under this chapter.

409.618 History History: 2001 a. 10.

409.619 409.619 Transfer of record or legal title.

409.619(1) (1) Transfer statement. In this section, “transfer statement” means a record authenticated by a secured party stating:

409.619(1)(a) (a) That the debtor has defaulted in connection with an obligation secured by specified collateral;

409.619(1)(b) (b) That the secured party has exercised its postdefault remedies with respect to the collateral;

409.619(1)(c) (c) That, by reason of the exercise, a transferee has acquired the rights of the debtor in the collateral; and

409.619(1)(d) (d) The name and mailing address of the secured party, debtor, and transferee.

409.619(2) (2) Effect of transfer statement. A transfer statement entitles the transferee to the transfer of record of all rights of the debtor in the collateral specified in the statement in any official filing, recording, registration, or certificate-of-title system covering the collateral. If a transfer statement is presented with the applicable fee and request form to the official or office responsible for maintaining the system, the official or office shall:

409.619(2)(a) (a) Accept the transfer statement;

409.619(2)(b) (b) Promptly amend its records to reflect the transfer; and

409.619(2)(c) (c) If applicable, issue a new appropriate certificate of title in the name of the transferee.

409.619(3) (3) Transfer not a disposition; no relief of secured party’s duties. A transfer of the record or legal title to collateral to a secured party under sub. (2) or otherwise is not of itself a disposition of collateral under this chapter and does not of itself relieve the secured party of its duties under this chapter.

409.619 History History: 2001 a. 10.

409.620 409.620 Acceptance of collateral in full or partial satisfaction of obligation; compulsory disposition of collateral.

409.620(1) (1) Conditions to acceptance in satisfaction. Except as otherwise provided in sub. (7), a secured party may accept collateral in full or partial satisfaction of the obligation it secures only if:

409.620(1)(a) (a) The debtor consents to the acceptance under sub. (3);

409.620(1)(b) (b) The secured party does not receive, within the time set forth in sub. (4), a notification of objection to the proposal authenticated by:

409.620(1)(b)1. 1. A person to which the secured party was required to send a proposal under s. 409.621; or

409.620(1)(b)2. 2. Any other person, other than the debtor, holding an interest in the collateral subordinate to the security interest that is the subject of the proposal;