| 5. The rules stated in subsections (2)(b) and (c), and the |
rule in subsection (3), are is best understood by reviewing a |
hypothetical. Assume that a merchant engaged in the business of |
selling and leasing musical instruments obtained possession of a |
truck load of musical instruments on deferred payment terms from |
a supplier of musical instruments on January 6. To secure |
payment of such credit the merchant granted the supplier a |
security interest in the instruments; the security interest was |
perfected by filing on January 15. The merchant, as lessor, |
entered into a lease to an individual of one of the musical |
instruments supplied by the supplier; the lease became |
enforceable on January 10. Under subsection (2)(b) the lessee |
will prevail (assuming the lessee qualifies thereunder) unless |
subsection (c) provides otherwise. Under the rule stated in |
subsection (2)(c) a priority dispute between the supplier, as the |
lessor's secured creditor, and the lessee would be determined by |
ascertaining on January 10 (the day the lease became enforceable) |
the validity and perfected status of the security interest in the |
musical instrument and the enforceability of the lease contract |
by the lessee. Nothing more appearing, under the rule stated in |
subsection (2)(c), the supplier's security interest in the |
musical instrument would not have priority over the lease |
contract. Moreover, subsection (2) states that its rules are |
subject to the rules of subsections (3) and (4). Under this |
hypothetical the lessee should qualify as a "lessee in the |
ordinary course of business". Section 2A-103(1)(o). Subsection |
(3) also makes clear that the lessee in the ordinary course of |
business will win even if he or she knows of the existence of the |
supplier's security interest. |