TrailBeast said

Make absolutely sure it full of fluid by checking in neutral.
Then I would pull the pan, check for debris.
Then pull the VB and air test it because it sounds like and internal seal or sealing ring leak if none of the above.
Also if 2nd has some sort of issue where it can't apply the band it can shift directly from 1st to 3rd, so be sure this isn't what it is doing by putting the trans in manual second.

An FYI, a plugged or incorrectly installed filter can cause a no 2-3 upshift also.

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Lefty71 said

Well, we had a Frod that we threw an old trans that sat forever and never moved... The band popped loose off one end from rust in one spot on it's maiden voyage. Either way, it needs all new seals and rubbers after sitting that long, so it's gotta come apart. Also, there are micro line filters in two places on that unit., one at the gov. and the other in the valve body. I'd bet they plugged right up once you kicked up the rust inside.

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