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Question
Efrem owns Fans & Players, a retail sporting goods shop. When Great Hill Lodge, a new ski resort, is built in the area, Efrem decides to expand and borrows a large sum from Hometown Bank. The bank takes a security interest in Efrem's present inventory and any after-acquired inventory as collateral for the loan. The bank properly perfects the security interest by filing a financing statement. Efrem's business is profitable, and he begins doubling his inventory. A year later, an avalanche destroys the ski slope and lodge. Efrem's business takes a turn for the worse, and he defaults on his debt to the bank. The bank seeks possession of his entire inventory, even though the inventory is twice as large as it was when the loan was made. Efrem claims that the bank has rights to only half of his inventory. Is Efrem correct? Explain.Answer
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