John Updike wanted to open up a high-end bookstore with a back room for controlled medicinal marijuana use and wine tasting revelries. To help bankroll the establishment (which he called “Updike’s Delights”), he borrowed a sum of money from Jack Kerouac. In borrowing the sum, Updike signed a security agreement under which he gave Kerouac a security interest in his signed copy of “Tropic of Cancer” and the left driver’s-side tire of James Dean’s Porche 550 Spyder.
For some extra money, Updike then obtained a loan from his friend John Cheever, orally agreeing to grant Cheever a security interest in his copy of director Sven Gade’s “Hamlet” and the movie rights to Updike’s next novel. Only after getting the loans does Updike organize, open, and establish Updike’s Delights as a sole proprietorship.
Both Kerouac and Cheever filed financing statements for the items with the proper office. Neither told Updike about filing the financing statements, nor did they ask the filing office to notify Updike of the filings. Kerouac listed "Updike’s Delights" as the debtor on his financing statement. Cheever listed "John Updike" as the debtor for Sven Gade’s Hamlet and the movie rights.
Updike’s Delights fell on hard times almost immediately after community backlash to Ezra Pound’s frequent patronage, most citizens not being invited to the VIP room, and the absurd name of the bookstore. To keep the doors open, Updike resorted a loan from the Mount Judge City Bank (“MJCB”). Updike authenticated a security agreement in which he granted a MJCB a security interest in the very same items of collateral covered by his earlier agreements with Kerouac and Cheever. MJCB then filed a financing statement covering each item of collateral, listing "John Updike" as the debtor. Assume that the filing office's search logic returns only exact matches.
Which statement is correct?
1.MJCB has priority over Cheever (as to the copy of "Hamlet" and the movie rights) and Kerouac (as to the copy of "Tropic of Cancer" and the tire).
2.Kerouac has a valid security agreement in the copy of "Tropic of Cancer" and the tire, and has priority over MJCB.
3. Cheever has a valid security agreement in the copy of "Hamlet" and the movie rights, and has priority over MJCB.
4. Both 2 and 3 are correct.