Zach wants to buy a new stereo, so he can listen to his Duran Duran albums at home while he is studying. He buys a stereo from Best Buy, and grants a purchase money security interest to Best Buy in order to secure his obligation to pay 12 installments of $50 for the stereo. Best Buy files a financing statement covering the stereo.

After a few months, Zach decides he’s through with studying for the year and doesn’t really need the stereo anymore. He sells it to Screech for $300. When Screech makes the purchase, he plans to put the stereo in his bedroom, and is not aware that Best Buy has a security interest in the stereo. Zach subsequently defaults in his payments to Best Buy since the $300 doesn’t cover what he still owes on the stereo.

Has Screech taken the TV subject to or free from Best Buy’s security interest?

1) Screech took free of the security interest under the garage sale exception

2) Screech took subject to the security interest because Best Buy’s purchase money security interest was automatically perfected

3) Screech took subject to the security interest because Best Buy filed a financing statement covering the stereo

4) Screech took subject to the security interest because the stereo became inventory (rather than consumer goods) in the hands of Zach once he decided to sell the stereo to Screech