Seaside Resorts, Inc. v. Club Car, Inc.

• Citation: 416 S.E.2d 655,308 S.C. 47
• Decision Date: 16 September 1991
• Docket Number: No. 1794,1794
• Court: Court of Appeals of South Carolina
• Parties: , 19 UCC Rep.Serv.2d 60 SEASIDE RESORTS, INC., d/b/a Oyster Bay Golf Links, Larry Young and Judy Young, Respondents-Appellants, v. CLUB CAR, INC., Lester Electrical of Nebraska, Inc., and Coastal Cars of Myrtle Beach, Defendants, Club Car, Inc., and Lester Electrical of Nebraska, Inc., Appellants-Respondents, and Coastal Cars of Myrtle Beach, Respondent. . Heard

Page 655

416 S.E.2d 655

308 S.C. 47, 19 UCC Rep.Serv.2d 60

SEASIDE RESORTS, INC., d/b/a Oyster Bay Golf Links, Larry

Young and Judy Young, Respondents-Appellants, v. CLUB CAR, INC., Lester Electrical of Nebraska, Inc., and Coastal Cars of Myrtle Beach, Defendants,

Club Car, Inc., and Lester Electrical of Nebraska, Inc.,

Appellants-Respondents,

and

Coastal Cars of Myrtle Beach, Respondent.

No. 1794.

Court of Appeals of South Carolina.

Heard Sept. 16, 1991.

Decided March 30, 1992.

Rehearing Denied April 30, 1992.

John B. McLeod and Amy M. Snyder, Greenville, Robert M. Erwin and Susan C. Pardue, Myrtle Beach, for appellants-respondents.

John A. Hagins, Greenville, for respondents-appellants.

John B. McCutcheon, Jr., and Mary Ruth M. Baxter, Conway, for respondent.

BELL, Judge:

This is an insurance subrogation action brought in the name of the insured, Seaside Resorts, Inc. The action arises from a fire that occurred on July 19, 1985, at the Oyster Bay Golf Links in Sunset Beach, North Carolina. Seaside owns and operates Oyster Bay. The fire destroyed the clubhouse, its contents, and a fleet of golf carts. Three insurance companies paid Seaside a total of $646,900 for the loss and were subrogated to its rights in that amount. Thereafter, Seaside brought this action against Club Car, Inc., the manufacturer and seller of the golf carts, Lester Electrical of Nebraska, Inc., the manufacturer of the golf cart battery chargers, and Coastal Cars of Myrtle Beach, Club Car's local service representative in Myrtle Beach, South Carolina. Larry and Judy Young, the owners of Seaside and the managers of Oyster Bay, were additional plaintiffs. The complaint alleged causes of action in strict liability, negligence, breach of express warranty, and breach of implied warranties of merchantability and fitness for a particular purpose. As the action was governed by the substantive law of North Carolina, which does not recognize strict products liability, the court dismissed the strict liability claim. The case was tried to a jury on the remaining causes of action. At the close of the evidence, the court directed a verdict for Coastal Cars. The jury returned a general verdict of $805,000 against Club Car and Lester Electrical. They appeal. Seaside cross appeals the directed verdict for Coastal Cars and the court's refusal to award prejudgment interest. We affirm.

The fire occurred after the golf course had closed for the day. The employee responsible for the golf carts had returned them to a storage area under the clubhouse, where he plugged them into an electrical current to recharge their batteries. About twenty minutes after he closed the cart area, the golf professional upstairs in the clubhouse heard a bumping noise downstairs and discovered black smoke coming from the cart area. The ensuing fire destroyed the clubhouse, its contents, and the golf cart fleet.

There is no factual dispute that the fire started in the golf cart area. The main factual question at trial was what caused the fire. Seaside contended a defective battery charger plug on one of the golf carts overheated and started the conflagration.

The plug is part of the battery charging system for each cart. The charger is plugged into a normal electrical wall outlet. It steps down the voltage and rectifies the current from AC to DC. The current leaves the charger through a cord that plugs into a receptacle on the golf cart. The DC current then flows to the battery and charges it. When the battery is charged, the charger automatically shuts off.

Lester manufactured battery chargers with yellow, flexible black, flexible red, stiff red, and gray plugs. ¹ The different colors represented manufacturer design changes in the plug from 1970 to the time of trial. Lester made these successive design changes to solve a problem of wires breaking inside the plug from flexing in the normal course of plugging and unplugging the battery charger. There was evidence that when a wire broke, electricity would arc across the break causing carbon to build up inside the plug. The plug would then overheat and could start a fire. The golf carts and batteries contained many flammable materials, including fiber glass, plastics, and chemicals, that could be ignited by a hot plug. Prior to the clubhouse fire, golf carts at Oyster Bay had actually caught fire from overheated plugs. In one case, the seat of a golf cart burst into flames within ten minutes after the battery charger was plugged in.

I.

Under North Carolina law, to recover for breach of an implied warranty of merchantability the plaintiff must prove that (1) a merchant sold goods, (2) the goods were not "merchantable" at the time of sale, (3) the plaintiff or his property was injured by such goods, (4) the defect or other condition amounting to a breach of the implied warranty of merchantability proximately caused the injury, and (5) the plaintiff so injured gave timely notice to the seller. N.C.G.S. § 25-2-314 (1986); Jolley v. General Motors Corp., 55 N.C.App. 383, 285 S.E.2d 301 (1982); Reid v. Eckerds Drugs, Inc., 40 N.C.App. 476, 253 S.E.2d 344 (1979), cert. denied, 297 N.C. 612, 257 S.E.2d 219 (1979). An action for breach of the implied warranty of merchantability entitles a plaintiff to recover without any proof of negligence on the defendant's part. Reid v. Eckerds Drugs, Inc., supra.

Club Car and Lester argue that the trial court should have granted their motions for a directed verdict and for judgment notwithstanding the verdict as to Seaside's claim for breach of the implied warranty of merchantability. The question for our decision is whether, viewing the record in the light most favorable to Seaside, there was any evidence that (1) the battery charger plugs on Seaside's golf carts were not fit for their ordinary purpose because they were defective at the time of sale and (2) the Oyster Bay fire was caused by a battery charger plug overheating. See, Stanley Smith & Sons v. Limestone College, 283 S.C. 430, 322 S.E.2d 474 (Ct.App.1984); Maybank v. S.S. Kresge Co., 46 N.C.App. 687, 266 S.E.2d 409 (1980), affirmed as modified, 302 N.C. 129, 273 S.E.2d 681 (1981). With respect to the defect, Seaside had the burden of presenting evidence that the plug was dangerous when used for the purpose for which it was manufactured. See, Cockerham v. Ward, 44 N.C.App. 615, 262 S.E.2d 651 (1980).

We conclude there was sufficient evidence to send the issue of breach of the implied warranty of merchantability to the jury.

Existence of a defect. The evidence showed Seaside purchased new golf carts from Club Car about once every two years. In December, 1982, Club Car sold Seaside golf carts with the flexible black battery charger plug. In the summer of 1984, most of these were replaced with the flexible red plug. At the time of the fire, the golf carts had mostly red plugs with some black plugs and a few yellow plugs.

There was testimony by Lester's president that the wires in the red and black plugs tended to break. He also testified that when a wire breaks there is a heat build-up in the plug. Lester knew of the problem with wire breakage and overheating in its plugs by 1983. Lester treated the failure of the plugs to work because of wire breakage as a warranty situation to be remedied free of charge to the consumer.

In October, 1984, there was a fire in a golf cart on charge at Oyster Bay. Seaside notified the product safety manager at Club Car of this fire. Coastal Cars performed warranty repairs on the golf cart. That same month an engineer began tests at Club Car's laboratory involving flame in the red plugs. These tests were in response to warranty inspection reports from the field and the golf cart fire at Oyster Bay.

The laboratory tests conducted for Club Car and Lester showed that when the wires were broken, electricity would arc across the break causing carbonization inside the plug. As a result, the plugs would overheat to the point of burning the neoprene insulation and generating smoke. Repeated arcing across the break set the plug aflame. The flame from the plug then burned the seat of the golf cart. The person who conducted these tests stated that wires in the black plug had a "much greater" propensity to break than those in the red plug. He also stated Club Car received numerous warranty complaints about the red and black plugs, including complaints about flames occurring at the plug. Club Car received complaints about the black plug within six months after it was introduced in 1982.

As Club Car received complaints about the plugs from the field, it reported them back to Lester. As a result, there were several meetings between the two companies before June, 1985, about failure of the plugs. To try to solve the problem, Club Car had undertaken internally to redesign the plug. Lester, however, convinced Club Car that its redesigned plug was not the best approach to take, suggesting instead some modifications in the red plug. Lester modified the plug. Club Car furnished these modified ("stiff red") plugs to its buyers after June, 1985.

Numerous documents in evidence also referred to the defective plugs and the problem of fire. A letter of June 14, 1984, signed by the warranty administrator for Club Car stated that the company had authorized a complete changeout of the plugs on carts at Oyster Bay "several weeks ago." It went on to express urgency that the changeout be made, noting that an intervening accident of a cart catching on fire would not have occurred if the changeout had been made when first authorized. A number of warranty inspection reports and internal memoranda dating from 1983 forward refer to plug failure, broken wires, burned plugs, and plugs shorting out. Internal correspondence referred to the plug problem as a "mechanical defect." Another letter from Club Car to Lester described the problem as "a defect in your plug." There was also evidence that internal wire breakage in the plug...