North Carolina § 25-2-107 - Goods to be severed from realty; recording.

§ 25-2-107. Goods to be severed from realty; recording.

A contract for the sale of minerals or the like (including oil and gas) or a structure or its materials to be removed from realty is a contract for the sale of goods within this article if they are to be severed by the seller but until severance a purported present sale thereof which is not effective as a transfer of an interest in land is effective only as a contract to sell. A contract for the sale apart from the land of growing crops or other things attached to realty and capable of severance without material harm thereto but not described in subsection (1) or of timber to be cut is a contract for the sale of goods within this article whether the subject matter is to be severed by the buyer or by the seller even though it forms part of the realty at the time of contracting, and the parties can by identification effect a present sale before severance. The provisions of this section are subject to any third-party rights provided by the law relating to realty records, and the contract for sale may be executed and recorded as a document transferring an interest in land and shall then constitute notice to third parties of the buyer's rights under the contract for sale. History (1965, c. 700, s. 1; 1975, c. 862, s. 4.) AMENDED OFFICIAL COMMENT Prior Uniform Statutory Provision: See Section 76, Uniform Sales Act on prior policy; Section 7, Uniform Conditional Sales Act. Purposes: Subsection (1). Notice that this subsection applies only if the minerals or structures "are to be severed by the seller". If the buyer is to sever, such transactions are considered contracts affecting land and all problems of the Statute of Frauds and of the recording of land rights apply to them. Therefore, the Statute of Frauds section of this Article does not apply to such contracts though they must conform to the Statute of Frauds affecting the transfer of interests in land. Subsection (2). "Things attached" to the realty which can be severed without material harm are goods within this Article regardless of who is to effect the severance. The word "fixtures" has been avoided because of the diverse definitions of this term, the test of "severance without material harm" being substituted. The security phases of things attached to or to become attached to realty are dealt with in the Article on Secured Transactions (Article 9) and it is to be noted that the definition of goods in that Article differs from the definition of goods in this Article. The provision in subsection (3) for recording such contracts is within the purview of this Article since it is a means of preserving the buyer's rights under the contract of sale. However, both Articles treat as goods growing crops and also timber to be cut under a contract of severance. Cross References: Point 1: Section 2-201. Point 2: Section 2-105. Point 3: Articles 9 and 9-105. Definitional Cross References: "Buyer". Section 2-103. "Contract". Section 1-201. "Contract for sale". Section 2-106. "Goods". Section 2-105. "Party". Section 1-201. "Present sale". Section 2-106. "Rights". Section 1-201. "Seller". Section 2-103. NORTH CAROLINA COMMENT Subsection (1) accords with prior North Carolina law that if a seller is to sever articles from the realty pursuant to a contract of sale, the contract is for a sale of personalty. See Walston v. Lowry, 212 N.C. 23 , 192 S.E. 877 (1937), where it is held that a contract whereby the seller contracts to sell timber, to be cut by the seller, is a contract to sell personalty and not a contract to sell realty requiring a writing. In addition, North Carolina went further than this UCC subsection and held that even if the contract specifies that the buyer is to make the severance of articles attached to the realty from the seller's land, such is a contract for the sale of personalty and not a contract for the sale of realty and need not be in writing as required under the statute of frauds relating to contracts for the sale of realty (GS 22-2). See Bishop v. DuBose, 252 N.C. 158 , 113 S.E.2d 309 (1960). If the contract does not contemplate the passage of title until after severance, it is a contract for the sale of personalty irrespective of who is to make the severance. Johnson v. Wallin, 227 N.C. 669 , 44 S.E.2d 83 (1947); Ives v. Atlantic & N.C.R.R., 142 N.C. 131 , 55 S.E. 74 (1906). Subsection (2) accords in principle with Flynt v. Conrad, 61 N.C. 190 (1867), that a growing crop is a personal chattel and can be transferred or reserved by parol contract because it is personalty. Other items affixed to real property which can be removed without injury to the realty are treated as goods by this subsection of the UCC even though attached at the time the contract is made and without regard to which party (buyer or seller) is to make the severance. This latter aspect of subsection (2) would appear to conflict with prior North Carolina law that if an item is affixed to the land, it is presumed to be a part of the realty to which attached and in order to create a binding contract to sell such item, there must be a writing as required for contracts for the sale of realty. See Stephens v. Carter, 246 N.C. 318 , 98 S.E.2d 311 (1957). Whether an item is to be deemed "real" or "personal" property ("goods") will be determined under the Code by its potential for severability without injury to the realty to which it is attached and not upon the more difficult determination of whether the item is a "fixture." It is interesting to note that in North Carolina the net effect of subsections (1) and (2) will be that while certain contracts will be rendered "sales of goods" that were considered "sales of realty" (see Stephens v. Carter, 246 N.C. 318 , 98 S.E.2d 311 (1957)), with the adoption of the UCC, GS 25-2-201, establishing a statute of frauds for the sale of goods for more than $500, more contracts will have to be in writing notwithstanding that many contracts formerly held to be sales of realty shall have become sales of "goods." Subsection (3) provides for recording a contract contemplating severance of items attached to realty, such recordation to be upon the real property recordation books, whether or not there will be material injury to the realty. This provision is new to North Carolina law and serves to preserve the rights of a buyer of an item attached to realty (which is to be severed) from the claims of purchasers of the realty and lien creditors of the owner-seller. Legal Periodicals. - For article, "Application of the Uniform Commercial Code to Option Contracts for the Sale of Goods, and Implying Promises to Find Sufficient Consideration: Why and How the North Carolina Supreme Court Got It Wrong in Fordham v. Eason," see 23 Campbell L. Rev. 49 (2000). For casenote: "Brevorka v. Wolfe Construction, Inc.: Did I Just Waive My Rights to the Implied Warranty of Workmanlike Construction?," see 26 N.C. Cent. L.J. 59 (2003).