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Public Service Electric & Gas Co. v. Stone

March 17, 1982

PUBLIC SERVICE ELECTRIC & GAS COMPANY, PLAINTIFF,
v.
LYNN T. STONE AND MICHAEL W. STONE, DEFENDANTS



Palese, J.s.c.

Palese

On February 5, 1979 a vehicle owned by defendants Lynn T. Stone and Michael W. Stone and operated by defendant Michael W. Stone struck a public utility pole in Cherry Hill, New Jersey. The pole was replaced by Public Service Electric and Gas Company. Plaintiff seeks to recover from defendants the costs expended to replace the pole in the sum of $936.18. Defendants' negligence was stipulated, leaving as the only issue the question of damages.

The trial judge, sitting with a jury, directed a verdict in the sum of $936.18, plus costs, at the conclusion of all of the testimony, having determined as a matter of law that overhead expenses were properly included as an element of reimbursement, no competent testimony having been presented by defendants raising a question of fact.

Plaintiff contended that both direct and indirect costs, including overhead, were proper elements of damage to be submitted to the jury, provided generally acceptable accounting standards were followed. Defendants urged that indirect and overhead expenses were not proper elements of damages in this factual situation, being too remote and speculative and, further, that there was an obligation on the part of plaintiff to prove that

these elements of damages were proximately caused by the negligence of defendants.

The issue thus presented is what elements were properly included in establishing the standards to determine the reasonable value of damages to the personal property of a public utility when the public utility has replaced its own damaged property. This issue is novel in New Jersey; the only prior case, New Jersey Power & Light Co. v. Mabee , 41 N.J. 439 (1964), determined that depreciation is not to be taken into consideration as an element in determining damages to a public utility.

William F. Dolan, Jr., a registered accountant of the State of New Jersey, an employee of plaintiff for 25 years and presently the assistant Comptroller, testified that acceptable accounting standards were utilized in determining these costs. Martin Corcoran, a senior accountant with 29 years of service to plaintiff and presently supervisor of construction billings, gave testimony providing the basis for determining the productive, nonproductive, fringe benefit, overhead, pole costs and storage expenses of the pole, which determined the damages to be $936.18 in this case.

Defendant made an offer of proof through Joseph Wilshire, Manager of Accounting Services for Atlantic City Electric Company, whose testimony would have indicated that the cost to Atlantic City Electric Company was much less than that of plaintiff. Upon conclusion of the Evid.R. 8 hearing the court determined that Wilshire was unable to establish a proper foundation to be able to compare the costs of Atlantic City Electric Company to replace a pole. Thus the court would not permit the testimony to be given. There was no other testimony presented on behalf of defendant.

Overhead is defined as follows in Black's Law Dictionary , (5 ed. 1968), at 995:

All administrative or executive qualities incident to the management, supervision or conduct of the capital outlay or business; distinguished from 'operating charges' or those items that are not specifically connected with the production and may be seen as the work progresses and are the subject of knowledge from observation.

Overhead is also defined in Words & Phrases , "Overhead," as follows:

As applied to a public service corporation, includes the expenses that would necessarily be incurred in the reproduction of property. The legal expenses of organization and expenses, for office, engineering, inspection, supervision and management during construction has always been defined as the necessary costs incurred by a company in its operations which cannot be easily identified with any individual product and which, by accepted cost accounting procedures, is spread over or allocated to the productive labor which is labor performed in the processing of a company's product.

In its request for reimbursement plaintiff established overhead costs of $37.1785 an hour, this rate being imposed on 14.20 productive hours for a total overhead cost of $527.93. It is obvious that the overhead cost is a rather substantial portion of a billing of $936.18.*fn1

HOURS RATES

TROUBLESHOOTER 2.70 11.4215

LABOR REPLACING POLE

(Productive Time) 10.33

(Non-Productive Time) 8.07

----

Total 2.80*fn* 18.40

LABOR TRANSFER CON-

STRUCTION AND

OTHER LINE CON-

STRUCTION GROUP 8.70*fn* 18.3910

(Productive &

Non-Productive)

DIRECT PAYROLL

SUPPORT

PENSIONS 13.5312

INSURANCE 5.5966

PAYROLL TAXES ...


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