Hughes Bank has a security interest in all the equipment owned by Abe Froman, the sausage king of Chicago. Hughes Bank's interest is perfected by a UCC-1 statement filed with the Illinois Secretary of State's office (the appropriate central filing office in Illinois). Hughes Bank's UCC-1 indicates that it covers all equipment including after-acquired.
Last month, Abe traded two trucks from its delivery fleet to a local hog farmer in exchange for pork to be used to make sausages. Abe informed Hughes Bank of the trade, but Hughes Bank did not take any action and did not amend its existing UCC-1 financing statement.
Does Hughes Bank have a perfected security interest in the pork?
1. No, because the existing UCC-1 only covers equipment, and the pork is inventory.
2. No, because Hughes Bank was aware of the exchange.
3. Yes, but only temporarily for 20 days, then perfection will lapse unless Hughes amends its UCC-1 to cover inventory.
4. Yes, Hughes Bank has a continuously perfected security interest in the pork.