Pop goes to Fourth/Sixth Bank to procure a loan for $1,500 to purchase a new fryer for his Mom & Pop Donut Shop. The Bank has him sign a security agreement that states Fourth/Sixth Bank has a security interest in the fryer until Pop is able to repay the debt.
Due to a national movement towards healthy living, Pop decides to change Mom & Pop’s Donut Shop into an Organic Smoothie Shop. Thus, Pop sells the fryer to Ronald at the bargain price of $500, without the consent of Fourth/Sixth Bank (as required by the security agreement).
Which statement is correct?
1. Fourth/Sixth Bank can repossess the fryer from Ronald if Fourth/Sixth Bank had perfected its security interest by having its lien noted on the certificate of title for the fryer.
2. Fourth/Sixth Bank can repossess the fryer from Ronald because its security interest was automatically perfected.
3. Fouth/Sixth Bank can reposses the fryer from Ronald if Fourth/Sixth Bank properly filed a financing statement before Ronald bought the fryer.
4. Fourth/Sixth Bank cannot reposses the fryer from Ronald and can only proceed against Pop to recover a judgment for the unpaid balance of the debt.