Kylie Karpenter, a young musician from Portland, Maine, bought a karaoke machine from Lenny Dealbreaker. Mighty Bank has a security interest in this deluxe top-of-the-line-machine, which Lenny Dealbreaker initially purchased for use at his bar, Tavern of the Toneless. This security interest, perfected by the filing of a proper financing statement, secures the repayment of Dealbreaker's line of credit from Mighty Bank. Mighty Bank did not authorize the sale of the machine to Kylie.
At the time of the sale to Kylie, the outstanding balance due on the line of credit was $2,000. Mighty Bank discovered the unauthorized sale 14 days later, when the balance due on the line of credit was $2,500. 31 days after they discovered the sale, Mighty Bank contacted Kylie to inform her to either turn over the karaoke machine or repay the balance of Dealbreaker's line of credit, which was now $3,500.
Which statement is correct?
1. Because Mighty Bank contacted Kylie before the end of the 45-day limit described in § 9-323(d), Kylie must pay Mighty Bank $3,500 to get clear title to the machine.
2. Kylie must pay Mighty Bank $2,500 (the balance due when it learned of the sale to Kylie) to get clear title to the machine.
3. Kylie must pay Mighty Bank $2,000 (the balance due on the date of the sale) to get clear title to the machine.
4. Kylie is a bonafide purchaser and took the machine free and clear of the security interest of Mighty Bank.