On Feburary15, 2011, Sterling Bank loaned $5,000 to Zach in exchange for a security interest in Zach’s Mercedes-Benz. Sterling Bank promptly applied to have its lien noted on the Certificate of Title for the car (which was issued by Missouri), and the lien was properly noted on the certificate.  On August 17, 2011, Zach moved to Maine to pursue a lucrative career as a lobster fisherman.  On October 20, 2011,  Zach bribed the clerk at the Maine Department of Motor Vehicles office to issue him a “clean” title to his Mercedes-Benz. 

On October 29, 2011, Zach sold the Mercedes-Benz to Jim, who paid value and bought the car for his personal use, unaware of the circumstances by which the Maine certificate of title was fraudulently issued. Assume it is now October 30, 2011.

What action, if at all, can Sterling Bank take to preserve its interest, or maintain continuous perfection,  in Zach’s Mercedes-Benz?

1. Sterling may still perfect its security interest in the car by noting its security interest on the Maine Certificate of Title on or before December 17, 2011.

2. Sterling Bank may take possession of the Mercedes-Benz in order to maintain continuous perfection in the Mercedes-Benz, as long as Sterling Bank takes possession by December 17, 2011.

3. Either 1 or 2

4. Nothing; Jim took the Mercedes-Benz free of Sterling Bank’s security interest.