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

(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.

(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:

(a) Value has been given;

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

(c) One of the following conditions is met:

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;

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;

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

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.

(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.

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

(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:

1. The security agreement becomes effective to create a security interest in the person's property; or

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.

(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.

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

(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

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

(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.

(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.

(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.

(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.

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

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).

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.

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

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.