Legal Definitions - commingled goods

Commingled goods refers to items that have been so thoroughly mixed or combined with other goods that their original, individual identities are completely lost. The result is a new, unified product or mass, where it's impossible to distinguish the original components.

This concept is particularly important in legal situations involving secured transactions, which are loans where a borrower pledges property (collateral) to a lender. If a lender has a security interest in goods that later become commingled, their interest doesn't disappear. Instead, it transfers to the new product or mass created by the commingling. If multiple parties had security interests in different original components, legal rules determine the priority of their claims over the new, combined product.

• Example 1: Blended Crude Oil
  Imagine a large oil refinery that receives crude oil from several different suppliers. Each supplier might have a bank loan secured by the crude oil they produce. When these separate batches of crude oil are pumped into a massive storage tank and blended together, their individual identities are lost. The resulting mixture is a new, uniform mass of crude oil. Any security interests that existed in the distinct batches of crude oil from individual suppliers would now attach to this combined mass.
• Example 2: Recycled Metal Alloy
  Consider a metal recycling facility that collects various types of scrap metal, such as aluminum cans, steel beams, and copper wiring. A lender might have a security interest in a specific batch of aluminum scrap. When all these different metals are melted down together in a furnace to create a new, custom metal alloy or a large ingot, the original identity of the aluminum, steel, and copper is completely lost. The new alloy is a commingled product, and the security interest in the original aluminum scrap would now apply to a portion of this new alloy.
• Example 3: Animal Feed Mixture
  A feed mill purchases large quantities of corn, soybeans, and oats from different farmers, each of whom might have a loan secured by their harvest. When these distinct grains are ground up, mixed, and processed together to create a specific blend of animal feed, the individual kernels of corn, soybeans, and oats lose their separate identities. The resulting animal feed is a commingled product. Any security interests held by lenders against the original separate batches of corn, soybeans, or oats would now apply to the finished animal feed mixture.