Volume 26 — North Carolina Court of Appeals Reports

Guaranty — guaranty of payment — failure to collect accounts receivable held as collateral Failure of a bank to collect accounts receivable held by it as collateral for a loan to a corporation did not constitute a defense to the bank's action against guarantors of payment of the loan.

1. Rules of Civil Procedure 59 — disregard of jury instructions — change of verdict by court improper — new trial proper Where the jury manifestly disregarded the trial court's instructions with respect to damages, it was not within the authority of the court to enter an order, "as an alternative to entering a new trial," eliminating an item of damages awarded by the jury and reducing the verdict by that amount; therefore, the action must be remanded for a new trial on the issue of damages. G.S. <cross_reference>1A-1</cross_reference>, Rule 59. 2. Uniform Commercial Code 20 — breach of contract — measure of damages In an action for breach of contract where plaintiff agreed to produce for defendant 6000 printed circuit boards at a stated price per board, six designs were to be used, if defendant requested less than 1000 boards of any design the charge would be more than the amount designated therefor in ascending scales from 200 to 999, this arrangement was referred to as the "bill back" provision, defendant purchased less than 200 boards in each design and then repudiated the contract, and plaintiff computed a "bill back" charge based on its normal sales price for an order of the size filled since the "bill back" provision did not cover quantities of less than 200, the trial court properly instructed the jury to exclude from its consideration of damages the amount charged by plaintiff as the "bill back" item, since the proper measure of damages in the action was the profit (including reasonable overhead) which the seller would have made from full performance by the buyer, together with any incidental damages provided in G.S. <cross_reference>25-2-710</cross_reference>, due allowance for costs reasonably incurred and due credit for payments or proceeds of resale. G.S. <cross_reference>25-2-708</cross_reference> (2). 3. Contracts 27 — breach of contract — motion for directed verdict properly denied The trial court did not err in denying defendant's motion for directed verdict in an action for breach of contract where plaintiff offered evidence of the contract between the parties for the production and sale of printed circuit boards, plaintiff's compliance with the contract and defendant's breach thereof, and plaintiff's items of damage.

Appeal by defendant from Bailey, Judge. Judgment entered 1 October 1974 in Superior Court, Wake County. Heard in the Court of Appeals 15 April 1975. Plaintiff Ray D. Lowder, Inc. (hereinafter referred to as Lowder), is a North Carolina corporation doing business as a grading and utility contractor.

<p>1. Fires § 3 — use of flammable glue — failure to show source of fire — sufficiency of evidence of negligence</p> <p>Where there was ample evidence to support a jury finding that defendants negligently permitted a concentration of highly explosive fumes to build up inside an air duct on which they were working and that their negligence created a substantial risk that in some manner the fumes might become ignited, failure of the evidence to establish with certainty any particular source of the spark which ignited the fumes was not fatal to plaintiffs’ claim for damages to their house and contents resulting from the fire.</p> <p>2. Fires § 3; Negligence § 27 — warning label on glue can — change in label subsequent to fire — evidence inadmissible</p> <p>In an action to recover for damages to plaintiffs’ house sustained in a fire allegedly caused by defendants’ negligent use of a flammable glue, the trial court did not err in refusing to allow evidence concerning a change which was made three years after the fire in the warning label on the glue can, since defendants’ conduct must be judged on the basis of the label which actually appeared on the can of glue which they were using when the fire occurred; also, the evidence was properly excluded insofar as the original defendants’ claim over against the third-party defendant glue manufacturer was concerned, since evidence of the taking of added precautions after an accident is not admissible as an admission of previous negligence.</p> <p>3. Fires § 3; Negligence § 27 — fire from use of flammable glue — evidence as to nonflammable glue — admissibility</p> <p>In an action to recover for damages to plaintiffs’ house sustained in a fire allegedly caused by defendants’ negligent use of a flammable glue in installing insulation in an air return duct, the trial court did not err in allowing plaintiffs to introduce evidence concerning a glue made by the same manufacturer of the glue used by defendants which was not flammable and which was suitable for use to adhere insulation to sheet metal, even in the absence of proof that defendants knew that the safer glue existed, since defendants held themselves out as knowledgeable and capable of performing the installation in a safe and competent manner, and defendants by implication represented that they had such knowledge, both as to available materials and safe and appropriate methods of installation, as was generally available in the industry.</p> <p>4. Fires § 3; Negligence § 29 — warning on glue can — no negligence of manufacturer — directed verdict proper</p> <p>The trial court did not err in directing verdict in favor of the third-party defendant glue manufacturer since the cautionary warning which appeared on the can of glue which defendants used was clear, comprehensible and adequate to put them on notice of the danger involved in its use, and the fire which was caused by defendants’ allegedly negligent use of the glue and in which plaintiffs sustained damages occurred, not because of any inadequacy of the warning given, but because defendants utterly failed to heed that warning.</p>

<p>Appeal by Great Lakes Carbon Corporation, Inc., and the Attorney General, Intervenors, from an order of the North Carolina Utilities Commission in Docket No. E-7, Sub 161, entered on 10 October 1974. Heard in the Court of Appeals on 10 April 1975.</p> <p>On 30 November 1973, Duke Power Company (Duke) filed with the North Carolina Utilities Commission (Commission) a proposed change in its rates and charges. This change was to take the form of a coal cost adjustment clause (coal clause), which was to be added to each of Duke’s retail electric schedules in North Carolina. An affidavit of Mr. B. B. Parker, Duke’s Executive Vice-President, was filed along with this application.</p> <p>On 19 December 1973, the Commission issued an order in Docket No. E-7, Sub 161, allowing the coal clause to go into effect on bills rendered on and after 19 January 1974. This order consolidated Docket No. E-7, Sub 161, with Duke’s pending general rate increase application (Docket No. E-7, Sub 159) and in so doing stated: “All evidence heretofore presented in this matter is subject to cross-examination and further review before final disposition as a part of Docket E-7, Sub 159.”</p> <p>On 18 January 1974, the Attorney General, an intervenor in Docket No. E-7, Sub 159, filed notice of appeal and exceptions and a motion to postpone the order of 19 December 1973, pending judicial review, or in the alternative to rescind said order or to modify said order to provide for a refund with interest under bond. This motion was denied by the Commission on 31 January 1974, and the Attorney General appealed to this Court. Oral arguments were heard on 30 May 1974; and on 17 July 1974 this Court in Morgan, Atty. General v. Power Co., 22 N.C. App. 497, 206 S.E. 2d 507 (1974) dismissed the appeal on the grounds that the order of 19 December 1973 was interlocutory in nature and not a final order from which an appeal could be taken. On 24 September 1974 our Supreme Court in a decision reported at 285 N.C. 759, 209 S.E. 2d 282 (1974) denied the petition of the Attorney General for a writ of certiorari and allowed motions of the Commission and Duke to dismiss the appeal.</p> <p>While the appeal of the Attorney General was pending in this Court, the Commission upon its own motion reconsidered the application filed by Duke on 30 November 1973, which requested that the Commission, upon a hearing, approve a coal clause subject to refund as a part of Duke’s rate schedule. In an order dated 16 April 1974 the Commission modified its order of 19 December 1973 to “provide for a refund with interest and Undertaking for refund pending final determination and Order in Docket No. E-7, Sub 161.”</p> <p>Public hearings in Docket No. E-7, Sub 159, and Docket No. E-7, Sub 161, were held for nineteen days between 28 May and 23 July 1974. Evidence was presented by Duke, the Commission, and Intervenors.</p> <p>On 10 September 1974, the Commission issued an order which rescinded the refund provisions set forth in its order of 16 April 1974 and, pending a final order, confirmed all monies collected and to be collected by Duke pursuant to the coal clause.</p> <p>On 10 October 1974 the Commission issued its final order in Docket No. E-7, Sub 161. The Commission made the following findings:</p> <p>1. The largest single item of expense for Duke in 1973 was fuel used for electric generation of which coal is the largest single item. During the test year, 1973, Duke spent approximately 104.6 million dollars for coal used in electric generation.</p> <p>2. Duke estimates its use of coal to be approximately 13 million tons in the generation of electricity during 1974.</p> <p>3. Duke’s coal consumption for 1973 exceeded the consumption for 1972 by two (2%) percent. The cost of coal “as burned” for 1973, however, exceeded the cost of coal for 1972 by nine (9%) percent. The average price of coal increased from $10.35/ton to$ll.26/ton, or from 43.94 cents per million Btu to 47.27 cents per million Btu.</p> <p>The monthly costs of coal “as burned” increased from 45.04 cents in January, 1973, to 52.56 cents in December, 1973, an increase of 17 percent. Coal received for the same period increased by 25 percent. The cost of coal “as burned” in March, 1974, was 76.90 cents, an increase of 46 percent over that in December, 1973.</p> <p>Coal as purchased for April, 1974, was 90.16 cents, an increase of 60 percent over December, 1973. Duke had projected an annual cost for 1974 of 77.7 cents with a monthly cost for April, 1974, of 88.6 cents. These sudden and drastic increases in the cost of coal used in steam electric generating stations have resulted in large increases in the cost of producing electric power. Such increases cannot be recovered in Duke’s rate design without automatic adjustment for fuel costs without further deterioration of earnings before general rate cases can be filed, properly noticed and heard under the procedure for general rate cases.</p> <p>4. The demand for coal continually increases, while the production of coal decreases. The electric utility industry is the single largest consumer of coal in the nation. The coal industry estimates a total consumption of coal of 659 million tons, of which 435 million will be consumed by the electric utilities. The drop in the production of coal appears to stem, in part, from certain laws and regulations. Duke has secured its coal at relatively favorable prices.</p> <p>5. Duke has been unable to earn the return on its common stock equity found to be fair and reasonable by this Commission. This shortfall in earnings has been caused, in part, by the sharp rise in the cost of fuel. A continuing shortfall in earnings could result in higher rates to the customer and possibly jeopardize service. The higher rates to the customers would be engendered by an increased annual cost of funds raised to finance the plant facilities.</p> <p>6. At present 194 electric utilities in 43 states have fuel adjustment clauses applicable to some class of service. To a large extent, coal, oil and gas are burned in the same plant facilities, and thus, a reasonable adjustment clause should include all fossil fuels. A fossil fuel clause would allow the pass-through of the increased cost of fuel in the monthly electric bill in an amount to reflect no more than the actual increase in the cost of fossil fuel over the base cost of the fossil fuel clause. Such a fuel clause must be administered so as not to increase the rate of return to Duke. The clause constitutes only'a pass-through of the expense incurred by Duke in the production of each kilowatt hour of electricity in the form of a direct surcharge for each kilowatt hour consumed.</p> <p>7. A “KWH” type of fuel clause, as opposed to a “Btu” type clause, adjusts for improvements in generation efficiency and appropriately passes any savings to the ratepayer.</p> <p>8. A reasonable base cost in a fossil fuel cost adjustment clause amounts to .5037 (sic) [.5039] cents per kilowatt hour, which was the cost of fossil fuel for the month of October, 1973, using the average heat rate for the year 1973. This base cost is derived from the costs of fossil fuels shown on monthly reports filed with the Commission and is consistent with the level of rates approved by the Commission in Docket No. E-7, Sub 159.</p> <p>9. In view of the circumstances surrounding the coal and substitute fossil fuel market, the fossil fuel adjustment clause is a reasonable method by which Duke can recover a part of its reasonable operating expenses.</p> <p>The Commission made conclusions which except where quoted are summarized in part as follows:</p> <p>(1) Price fluctuations in the price of fuel, an item of great expense to the utility, could seriously impair Duke’s ability to earn the return set by the Commission as reasonable and fair.</p> <p>(2) Duke’s estimated need for thirteen million tons of coal to generate electricity during 1974 is reasonable.</p> <p>(3) “[T]he cost of coal continues to spiral upward exceeding the estimated increases projected by the company.”</p> <p>(4) “Duke has been reasonably diligent in its coal procurement program and practices and . . . comparatively speaking, it has obtained what might be called favorable results, considering the altogether unfavorable condition of the coal market since the fall of 1973. These market forces to which we have alluded and with which Duke has had to deal are beyond the ability of either this Commission or Duke Power Company acting alone to control. Under these adverse and unfortunate circumstances, we are compelled to allow Duke to recoup such great increases in coal cost in a reasonably expeditious and orderly manner, for to do otherwise would imperil Duke’s very existence.”</p> <p>(5) “[T]he substantial increase in the cost of coal has contributed to the shortfall in earnings experienced by Duke.”</p> <p>(6) A coal clause is an appropriate and well recognized method of recovering increased fuel costs. “[A] coal cost adjustment clause is insufficient in that such clause does not account for increases or decreases in costs in other fossil fuels, i.e., oil and gas . . . [and] a fossil fuel clause, i.e., a clause that would account for increases and decreases in costs of oil and gas, as well as in costs of coal, is more appropriate.” Furthermore, “a monthly monitoring of fuel costs and resulting fuel adjustment factors will limit the possibility of Duke achieving earnings beyond a fair rate of return and will keep the Commission cognizant of the effect of the fuel clause on the ratepayers.”</p> <p>(7) The “savings resulting from improvements in generation efficiency will automatically be passed on to the customers in the operation of the fossil fuel clause.”</p> <p>(8) “During 1973 Duke incurred a cost of coal significantly in excess of that recovered by Duke in the energy portion of the rates charged to its customers. In a fuel market in which there exists steadily increasing prices, Duke will continually experience a shortfall in earnings in that rates designed without an adjustment clause will not permit Duke to recover the cost it incurs in purchasing fossil fuel. In light of these circumstances, a fossil fuel adjustment clause is a reasonable method of recovering the costs Duke incurs in its purchase of fuels.</p> <p>[T]he cost of fossil fuel incurred by Duke is a reasonable operating expense to the extent that Duke acts in good faith in negotiating with suppliers and to the extent that Duke pays a fair and reasonable price for the fuels purchased.</p> <p>[A] fossil fuel adjustment clause is a part of the rate to be fixed by the Commission pursuant to G.S. 62-133. The Commission further concludes that G.S. 62-133 (b) (5) directs the Commission to fix rates to be charged as will earn in addition to reasonable operating expenses the rate of return on the fair value of the property which produces a fair profit. Thus, the Commission concludes that for the purpose of approving a fossil fuel adjustment clause, the Commission need only determine whether the company’s operating expenses are reasonable in that the clause will not increase Duke’s rate of return, but will merely slow attrition of the rate of return. The rate of return on the fair value of the property used and useful in providing service has been determined in the general rate case, E-7, Sub 159, consolidated for hearing with this docket, E-7, Sub 161.</p> <p>[A] system of monitoring the operating of the fossil fuel clause will insure that Duke acts in good faith in its negotiations, as well as protect the ratepayers of North Carolina from Duke recovering more through the fossil fuel clause than its reasonable operating expenses as they relate to cost of fossil fuels increase above the base cost in the fossil fuel clause.”</p> <p>Based on the foregoing findings and conclusions, the Commission ordered (1) that the fossil fuel adjustment clause become effective 1 November 1974, (2) that the coal clause remain in effect until 1 November 1974, (3) that Duke file with the Commission each month a complete Fossil Fuel Adjustment Clause Memorandum, and (4) that the motion of the Attorney General praying that the Commission reconsider or rescind its Order of 10 September 1974 be denied. From entry of the order of the Commission, Great Lakes Carbon Corporation, Inc., and the Attorney General appealed.</p>

<p>Contracts § 10; Telephone and Telegraph Companies § 4 — mistakes in Yellow Pages — contract limiting liability — public policy</p> <p>A contract provision limiting a telephone company’s liability for errors or omissions in an advertisement in the Yellow Pages of a telephone directory to the cost of the advertisement is unreasonable and ' the direct consequence of a real disparity in bargaining power and will not be enforced by the courts as a matter of public policy.</p> <p>Judge Parke® dissenting.</p>

Appeal by plaintiffs from Cowper, Judge. Judgment entered 19 December 1974 in Superior Court, Chowan County. Heard in the Court of Appeals 28 May 1975.

Appeal by petitioners from Copeland, Judge. Order entered 14 November 1974 in Superior Court, Chowan County. Heard in the Court of Appeals 28 May 1975. In 1944 an action was brought against Lonnie Boyce in the Superior Court of Chowan County by plaintiffs who were named in the complaint as the heirs of Hannibal Badham. It was alleged that plaintiffs were the owners of real property consisting of 319 acres and that defendant claimed an interest in the land.

Appeal by plaintiffs from Cowper, Judge. Judgment entered 19 December 1974 in Superior Court, Chowan County. Heard in the Court of Appeals 28 May 1975. The facts of this case are set out more fully in the companion cases, Howard v. Boyce, No. 751SC121, and Overton v. Boyce, No. 751SC261, filed this day. In Howard v. Boyce, supra, plaintiffs in the instant case appealed from an order issued 14 November 1974 denying their motions to set aside a prior judgment.

Appeal by plaintiff from Cowper, Judge. Judgment entered 2 November 1974 in Superior Court, Lenoir County. Heard in the Court of Appeals 6 May 1975. This is a civil action heard by the court without a jury upon stipulated facts and documentary evidence.

<p>1. Criminal Law § 91— recess to obtain witness — denial proper</p> <p>The trial court did not err in denying defendant’s motion for a one-week recess in the trial for the purpose of obtaining the presence of a witness who lived out of the State and who would allegedly testify to establish an alibi.</p> <p>2. Robbery § 4 — armed robbery of pedestrian — sufficiency of evidence •</p> <p>Evidence was sufficient to be submitted to the jury in a prosecution for armed robbery where it tended to show that one defendant drove a car, the other two defendants were passengers in the car, the passengers pointed a gun at a pedestrian while they were seated in the car, and they robbed the pedestrian of his wallet.</p> <p>3. Searches and Seizures § 2— consent to search vehicle</p> <p>Evidence was sufficient to support the trial court’s finding that defendant voluntarily signed a consent to search his vehicle, and his consent was not coerced because officers told him that if he did not consent they could get a search warrant.</p> <p>4. Criminal Law § 97 — introduction of additional evidence by State — no error</p> <p>Where the State rested its case just prior to the evening recess, the trial court did not err upon the reconvening of court on the following morning in permitting the State briefly to recall two of its witnesses.</p>

Appeal by plaintiffs from Webb, Judge. Judgment entered 1 November 1974 in Superior Court, Pitt County. Heard in the Court of Appeals 28 May 1975. Plaintiffs instituted this action to recover damages for trespass. They alleged that defendant wrongfully entered and trespassed upon their land by operating a locomotive hauling gondola cars along tracks across plaintiffs’ land.

On certiorari to review a trial before McLean, Judge. Judgment entered 21 November 1972 in Superior Court, Gaston County. Heard in the Court of Appeals 17 June 1975. Defendant was convicted of armed robbery, and a sentence “for a period not to exceed twenty-five years” was imposed. On 15 February 1972 Barbara Dow and Dorothy Seward were working at the Dow Grocery Store in Gastonia. The defendant entered the store, threatened the two women with a gun, and demanded money.

Appeal by plaintiffs from Kivett, Judge. Judgment entered on 12 November 1974 in Superior Court, Anson County. Heard in the Court of Appeals 9 June 1975. In his answer to the processioning petition the defendants allege that the dividing line between the lands of the parties has been established and counterclaimed to recover for destruction of crops and timber.

<p>1. Criminal Law § 34 — evidence of another crime — admissibility for identification</p> <p>In this armed robbery prosecution wherein the State’s evidence tended to show that defendants fled the crime scene in a 1968 or 1969 lime-green Cougar with a white top, evidence that defendants, between the time of the crime charged and their apprehension, committed a robbery utilizing a pistol and driving a 1968 or 1969 green car was admissible for purposes of identification in view of their defense of alibi.</p> <p>2. Criminal Law § 114 — instructions — references to alias</p> <p>In this armed robbery prosecution, defendant was not prejudiced by the trial court’s references to him in the jury instructions as “alias Lee Nelson” where the words “also known as Lee Nelson” appear in 'the title of the case following defendant’s name, evidence of the alias was admitted without objection, and defendant did not move to strike the alias from the title or object to its use by the district attorney or the trial court. j</p>

Appeal by plaintiff from Browning, Judge. Judgment entered 21 January 1975 in Superior Court, Johnston County. Heard in the Court of Appeals 18 June 1975.

Appeal by defendants from Hall, Judge. Order entered 18 December 1974 in Superior Court, DURHAM County. Heard in the Court of Appeals 14 May 1975.

Appeal by defendant from Seay, Judge. Judgment entered 1 November 1974 in Superior Court, Randolph County. Heard in the Court of Appeals 8 May 1975. Defendant was convicted in district court of operating a motor vehicle on a public highway while under the influence of intoxicating liquor. On appeal to superior court he again pled not guilty and was tried de novo.

Appeal by defendant from McLelland, Judge. Judgment entered 11 October 1974 in Superior Court, Wake County. Heard in the Court of Appeals 29 May 1975. Plaintiff instituted this action on 16 August 1971 seeking damages in the amount of lost wages from 12 August 1968, the date of defendant’s alleged wrongful termination of her employment as Director of the Little River Community Action Center in Zebulon. She also sought restoration to her former position.

Appeal by defendant from Grant, Judge. Judgment entered 23 January 1975 in District Court, Rowan County. Heard in the Court of Appeals 6 May 1975. Plaintiff brought this action alleging damages to his soybean crop by defendant’s cattle, which were negligently allowed to escape from defendant’s pasture. The case was tried before the judge without a jury. The trial judge made findings of fact and entered judgment that plaintiff recover the sum of $420.00 and court costs.

Appeal by respondent J. Preston Johnson from Braswell, Judge. Judgment entered 6 December 1974 in Superior Court, Durham County. Heard in the Court of Appeals 17 June 1975. On 4 October 1974, J. Preston Johnson was orally prohibited by the presiding judge from signing any bonds or engaging in any bond activity and was ordered to show cause why his authority to act as a bondsman should not be permanently revoked.

Appeal by defendant from Fowler, Judge. Judgment entered 13 December 1974 in District Court, Guilford County. Heard in the Court of Appeals 10 June 1975. Plaintiff wife brought an action for divorce from bed and board and alimony against her husband. The case was tried without a jury. This Court is not interested in recounting the sordid evidence adduced at the hearing.

Appeal by defendant from Phillips, Judge. Judgment entered 9 December 1974 in District Court, Gaston County. Heard in the Court of Appeals 9 June 1975. Plaintiffs instituted an action in summary ejectment before a magistrate to move defendant from an apartment owned by plaintiffs alleging that defendant had failed to pay her rent.

Appeal by defendant from Crissman, Judge. Judgment entered 15 January 1975 in Superior Court, Cabarrus County. Heard in the Court of Appeals 10 June 1975. Defendant was tried in the District Court of Cabarrus County on his plea of not guilty to a warrant charging him with operating a motor vehicle on a public street in the City of Concord on or about 11 May 1974 while his operator’s license was revoked.

Judgment entered 1 October 1974 in Superior Court, Franklin County. Heard in the Court of Appeals 13 May 1975. Defendant was tried on his plea of not guilty to an indictment charging him with the felonious larceny of $1,200.00 from Jack Collins.