Senator Claire McCaskill wants to buy a new personal airplane to replace the one she sold to pay her back taxes. She takes out a loan with Big Loans 'R Us (Big Loans) in the amount of $3,000,000 to buy a 2010 Embraer Phenom 100 business jet from JetBrokers, Inc. Senator McCaskill signs a security agreement with Big Loans, describing the jet that she will soon acquire as collateral for the loan. Big Loans timely files a UCC-1 listing “business jet” as the collateral. Unbeknownst to Big Loans, she doesn’t use the money to buy the jet and instead funnels it into her campaign; she then turns around and signs an agreement with JetBrokers under which she promises to pay JetBrokers the $3,000,000 purchase price in 36 equal monthly installments; under the agreement, JetBrokers retains title to the jet to secure the unpaid purchase price. JetBrokers did not take adequate steps to perfect its security interest.
Before making a payment to either creditor, Senator McCaskill lost the election and access to all the money she had been planning to funnel into paying for the jet, and she defaults on both contracts. JetBrokers obtains a judgment against McCaskill, has the sheriff levy on the plane, and sells the plane at a public auction for $250,000. Does JetBrokers get to keep the $250,000?
1. No; Big Loans had first priority because it had a perfected security interest in the plane
2. Yes, because JetBrokers held a judgment lien in the plane with priority over Big Loans' unperfected security interest.
3. No, because JetBrokers failed to perfect its security interest in the plane
4. Yes, because the description of the collateral in Big Loans's UCC-1 filing was seriously misleading