Problem.Automatic perfection

     Sears sells a new refrigerator to Doctor Ruben Chavez, a veterinarian. Dr. Chavez signs a retail installment contract, promising to pay for the refrigerator in twelve monthly installments. Dr. Chavez grants Sears a security interest in the refrigerator to secure payment of the purchase price. If Dr. Chavez uses the refrigerator at his office to store medical products, what, if anything, must Sears do to perfect its security interest? What if Dr. Chavez uses the refrigerator in the kitchen of his home to store food? What if the veterinary office of Dr. Chavez is physically attached to his home and Dr. Chavez stores both medical products and food in his refrigerator?  See U.C.C. 9-308(a), U.C.C. 9-309(1), U.C.C. 9-102(a)(23), U.C.C. 9-103(a), (b), U.C.C. 9-310. 

     If Dr. Chavez defaults in his payments, is Sears likely to want to repossess or simply sue on the debt? Will this depend upon how long before the default Dr. Chavez purchased the refrigerator or on how much is still owing?  If Sears does not want to repossess, does it matter if the security interest is perfected? If Sears wants to repossess, may it do so even if the security interest was not perfected? 

     Suppose Sears wants to repossess and the security interest was not perfected.  If the security interest held by Sears is not perfected, a third party's interest in the refrigerator may take priority over the security interest held by Sears.  How likely is it that any of the following third parties would have a claim to the refrigerator:  a buyer of the refrigerator from Dr. Chavez;  a judgment creditor of Dr. Chavez seeking to execute on assets of Dr. Chavez to enforce the judgment; a bankruptcy trustee in a bankruptcy case filed by Dr. Chavez; another creditor with a consensual security interest in the refrigerator?   

     If Sears is concerned about losing a priority dispute with a third party, should Sears inquire of Dr. Chavez how he intends to use the refrigerator? Should it get his written representation of intended use? What if he misrepresents his intention or what if Dr. Chavez changes his mind about his intended use of the refrigerator after making his purchase?  cf. U.C.C. 9-628(c).