Andy Warhol, a rare art dealer, wanted to purchase an original Monet sketch for his personal collection. To do so, he obtained a $100,000 loan from Big Bank and signed a security agreement that granted the Bank a security interest in “all of his consumer goods.” Because this sketch was a known rare collector’s item, the Bank filed a UCC-1 covering the collateral with the Secretary of State’s office.
Unfortunately, Andy’s business is not doing well, and he falls into financial difficulty a year after securing the loan. He sells the sketch to his friend Jackson Pollock, but still defaults on his loan. Now, Big Bank would like to either get the sketch back or get the money it lent Warhol back. Which of the following best describes the Bank’s position?
1. Bank can has an unperfected security interest in the sketch.
2. Bank has no valid security interest in the sketch.
3. Bank has a perfected security interest in the sketch and can repossess the sketch from Pollock.
4. The Bank has a security interest in the proceeds Pollock paid to Warhol for the sale of the sketch.