Suzy, a student whose favorite hobby is baking cupcakes, decides to revamp her kitchen and install the finest walk-in convection oven, a LR-JP-ST496, similar to those used in fine French bakeries. Suzy bought the oven through LR Environmental Equipment Company (LREEC) on credit, granting the store a purchase-money security interest in the goods.
The day after the purchase, Suzy’s fridge, a Northland Refrigerator with Glass Door: Model 60SS-WG, catches fire and she is forced to replace it in an effort to maintain the new level of superiority in her kitchen, especially since the new oven was installed. Suzy gets a personal loan from Commerce Bank in the amount of $12,000 to buy a replacement fridge. She uses her new oven as collateral and signs a security agreement. Commerce Bank perfects by filing the same week, but LREEC has not yet filed a UCC-1 financing statement covering the oven. Which statement is correct regarding priority as to the oven?
1. Commerce Bank would have priority. When the collateral is equipment or consumer goods, a seller must always file a UCC-1 financing statement in order to perfect a purchase-money security interest.
2. Suzy’s new oven is “equipment” for Article 9 purposes, and thus LREEC has 20 days from the time Suzy took possession of the oven to perfect its security interest and take priority over Commerce Bank.
3. Suzy’s new oven is “consumer goods” for Article 9 purposes, and thus LREEC's security interest was automatically perfected has priority over Commerce Bank.
4. To take priority over LREEC, Commerce Bank must notify LREEC of its intent to take a purchase-money security interest in the specified collateral. If Commerce Bank provided appropriate notification, it will have priority as to the oven.