Anne, a mother of three, dies and leaves her entire estate to her three children: B, C, and D. Included in the estate is a very valuable diamond that Anne's will gives to the three children in equal shares. B, deciding he wants to add on to his house, borrows $50,000 from E Bank and signs a security agreement that grants E Bank a security interest in the diamond. E Bank does not perfect its security interest in the diamond.
Unfortunately for her three children, Anne had a lot of debts from creditors and to pay off these debts, the children decide to sell the diamond to F without the knowledge or authorization of E Bank. F did not know of E Bank’s security interest in the diamond.
B has now defaulted. E Bank attempts to repossess the diamond. Which statement is correct?
1. E Bank can repossess the entire diamond from F
2. E Bank cannot repossess the diamond from F
3. E Bank cannot repossess the diamond from F, but has an action for conversion against F
4. E Bank can recover only a 1/3 interest in the diamond.