Tree-fellers, Inc. is a timber supply company and Brad is a heavy equipment dealer. On March 1, 2012,Tree-fellers and Brad entered into an agreement in which Tree-fellers would purchase four tree-felling-machines from Brad for $100,000, but would only put 50% of the purchase price down at execution, and the remainder would be owed to Brad. The authenticated security agreement listed as collateral “all of Debtor’s inventory, now owned and after-acquired.”
About two months after the execution of this agreement, Tree-fellers halted their tree-felling operations because their supply of timber was exceeding demand by customers. Within 6 months of execution, business was so bad that Tree-fellers defaulted on their loan with Brad. At that time Tree-fellers had $20,000 in cut timber, and $100,000 of standing timber (the right to cut the standing timber had been conveyed to Tree-fellers by virtue of timber deeds entered into in January 2012 and April 2012).
Which statement is correct?
(1) Brad does not have a valid security interest in any of the timber because the security agreement did not describe the land on which the standing timber is located.
(2) Brad has a valid security interest in the cut timber, but the standing timber is "equipment" and thus is not subject to Brad's security interest.
(3) Brad has a valid security interest in both the cut timber and the standing timber.
(4) Brad has a valid security interest in the cut timber, and will acquire a valid security interest in the standing timber as soon as it is cut.