A few months ago, Farmer Melvin borrowed $2,000 from Guaranty Bank to purchase a new Grainger chainsaw and signed an agreement granting Guaranty Bank a security interest in the chainsaw as collateral. When Guaranty Bank loaned Farmer Melvin the money, it did not file a UCC-1 covering the chainsaw. Farmer Melvin bought the chainsaw at his local Lowe’s, using the $2,000 loan proceeds. Melvin took the chainsaw home and used it to trim trees and bushes around his house for a day, but then has used it ever since in his farming operation to clear up fencerows and brush to protect his acreage from overgrowth into crop area.
Does Guaranty have a perfected SI in the chainsaw?
1. No, because a secured party must always file a UCC-1 to perfect.
2. Yes, because Guaranty Bank has a PMSI in the chainsaw.
3. Yes, because Melvin's first use of the saw was for personal purposes
4. No, if Melvin bought the saw with the primary intent to use it in his farming operations