## Facts

- Miami Metals I, Inc. and affiliated debtors (formerly Republic Metals Refining Corp.) operated a precious-metals refining business.
- Customers shipped raw precious metals (primarily gold and silver) to the debtor for assay/refining and later settlement.
- Many customer relationships were governed by a written document titled “Executed Terms” (also described as standard terms and operating conditions).
- The Executed Terms provided that, after processing, the debtor would return to the customer an **equivalent** quantity of refined metal, not the identical metal delivered.
- In the refining process, metals received from multiple customers were **commingled**, making customer-specific identification of metal impracticable.
- The customers contended the arrangement was a **bailment** (the debtor held customer property for processing), so the metal in the debtor’s possession on the petition date remained customer-owned.
- The debtor (and its secured “Senior Lenders”) argued the arrangements were **purchase-and-sale** transactions, so title passed to the debtor and the metals (and proceeds) were property of the bankruptcy estate.
- Customers argued the Executed Terms lacked typical sale terms (such as a fixed price, specific quantity, and timing), and therefore could not be sales contracts.
- Although the Executed Terms did not state a fixed price, they provided a pricing mechanism tied to the **London Bullion Market Association (LBMA)** current pricing.
- The bankruptcy court was asked to determine whether customers held ownership interests in metals in the debtor’s possession at the time of the bankruptcy filing.

## Issues

1. Whether the customers’ deliveries of precious metals to the debtor under the Executed Terms created a **bailment** or a **sale of goods** under applicable commercial law.
2. Whether contract terms providing for return of **equivalent** refined metal, together with **commingling** during processing, support characterization as a sale rather than a bailment.
3. Whether a market-based pricing formula (LBMA pricing) is sufficient for an enforceable sales contract despite the absence of a stated fixed price.
4. If the transactions were sales, whether the metals in the debtor’s possession on the petition date were **property of the estate** under 11 U.S.C. § 541 (and thus available as collateral for secured lenders).

## Decision

- The court held that the customers’ transactions under the Executed Terms were **sales**, not bailments.
- Because the agreements required return of **equivalent** metal and the debtor **commingled** customer metals, the customers did not retain title to specific metal held by the debtor.
- The court concluded that the Executed Terms’ reference to **LBMA pricing** supplied a workable method to determine price and did not prevent treatment of the arrangements as sales.
- As a result, the metals and related interests at issue were **property of the bankruptcy estate**, and customers held contractual claims rather than ownership rights in identifiable metal.

## Legal Principles

- A **bailment** generally contemplates an obligation to return the **same** goods delivered (or identifiable goods held for the bailor); an obligation to return only **equivalent** goods is more consistent with a sale and a debtor-creditor relationship.
- **Commingling** of fungible goods, combined with a promise to return an equivalent quantity, is strong evidence that the recipient is not merely holding property in safekeeping for return in kind.
- Under **UCC Article 2**, a sales contract may be enforceable even with open terms if the parties intended to contract and the missing term (including price) can be determined by an agreed method.
- A price may be set by reference to an external market standard (such as **LBMA current pricing**), which can satisfy UCC requirements for a determinable price.
- If title to goods passed to the debtor prepetition, the goods are included in **estate property** under 11 U.S.C. § 541, and customers’ rights are typically limited to claims for performance or damages rather than rights to specific property.

## Conclusion

In re Miami Metals I, Inc. held that customer deliveries of precious metals to a refiner under “Executed Terms” were sales, not bailments, where the refiner could commingle metals and owed only an obligation to return equivalent refined metal priced by an agreed market reference (LBMA). Because title passed to the debtor, the metals in the debtor’s possession at bankruptcy became property of the estate, leaving customers with unsecured contractual claims rather than ownership of specific metal.


In re Miami Metals I, Inc., 603 B.R. 727 (2019)