Also known as: products or mass · commingled goods · product/mass
Written by attorneys · grounded in primary & secondary sources — see below
The resulting item formed when goods are physically united with other goods in such a manner that their individual identities are lost. A security interest does not exist in the commingled goods themselves. The interest instead attaches to this resulting item.
Metro Plastics obtained resin pellets subject to a perfected security interest held by First Bank. Metro later obtained additional pellets from Allied Resins under a separate perfected security interest. Metro fed both sets of pellets into extrusion machines that melted and blended them into one continuous roll of plastic sheeting. First Bank's security interest now attaches to the roll of sheeting.
Prairie Grain Elevator received wheat subject to a perfected security interest held by First Bank. Prairie stored the wheat in large silos where it was dumped together with wheat owned by local farmers and Plains Cooperative. After several months of mixed storage the original truckloads lost all separate identity within the larger bulk. First Bank's security interest now attaches to Prairie's proportional share of the mixed mass of wheat.
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The security interest does not continue in the original goods as such. It attaches instead to the resulting product or mass. If the original interest was perfected the interest in the product or mass remains perfected.
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A security interest perfected before commingling has priority over an unperfected interest. When multiple interests are perfected before commingling they rank equally in proportion to the value of the original collateral at the time it became commingled.
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No. The interest continues by attaching to the resulting product or mass. The rule prevents loss of collateral simply because raw materials are processed into a larger undifferentiated item.
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