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Ultramares Corp. v. Touche, Niven & Co.

Court of Appeals of New York

December 3, 1930, Argued ; January 6, 1931, Decided

No Number in Original


 [*173]   [**442]  The action is in tort for damages suffered through the misrepresentations of accountants, the first cause of action being for misrepresentations that were merely negligent and the second for misrepresentations charged to have been fraudulent.

In January, 1924, the defendants, a firm of public accountants, were employed by Fred Stern & Co., Inc., to prepare and certify a balance sheet exhibiting the condition of its business as of December 31, 1923. They had been employed at the end of each of the three years preceding to render [***8]  a like service. Fred Stern & Co., Inc., which was in substance Stern himself, was engaged in the importation and sale of rubber. To finance its operations, it required extensive credit and borrowed large sums of money from banks and other lenders. All this was known to the defendants. The defendants knew also that in the usual course of business the balance sheet when certified would be exhibited by the Stern company to banks, creditors, stockholders, purchasers or  [*174]  sellers, according to the needs of the occasion, as the basis of financial dealings. Accordingly, when the balance sheet was made up, the defendants supplied the Stern company with thirty-two copies certified with serial numbers as counterpart originals. Nothing was said as to the persons to whom these counterparts would be shown or the extent or number of the transactions in which they would be used. In particular there was no mention of the plaintiff, a corporation doing business chiefly as a factor, which till then had never made advances to the Stern company, though it had sold merchandise in small amounts. The range of the transactions in which a certificate of audit might be expected to play a part [***9]  was as indefinite and wide as the possibilities of the business that was mirrored in the summary.

By February 26, 1924, the audit was finished and the balance sheet made up. It stated assets in the sum of $ 2,550,671.88 and liabilities other than capital and surplus in the sum of $ 1,479,956.62, thus showing a net worth of $ 1,070,715.26. Attached to the balance sheet was a certificate as follows:

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255 N.Y. 170 *; 174 N.E. 441 **; 1931 N.Y. LEXIS 660 ***; 74 A.L.R. 1139

Ultramares Corporation, Appellant and Respondent, v. George A. Touche et al., Copartners under the Firm Name of Touche, Niven & Company, Respondents and Appellants

Prior History:  [***1]  Cross-appeals from a judgment of the Appellate Division of the Supreme Court in the first judicial department, entered June 18, 1930, which modified and affirmed as modified a judgment in favor of defendants, entered upon an order of the court at a Trial Term setting aside a verdict in favor of plaintiff and dismissing the complaint. The defendants appeal from so much of the judgment as reversed the judgment dismissing the complaint as to the first cause of action and directed reinstatement of the verdict; and the plaintiff appeals from so much of said judgment as affirmed the judgment of the Trial Term dismissing the complaint as to the second cause of action.

 Ultramares Corp. v. Touche, 229 App. Div. 581, reversed.

Disposition: Judgment accordingly.


balance sheet, certificate, audit, invoices, correspondence, deceit, accounts receivable, cause of action, circumstances, auditors, certify, cases, words, liability for negligence, trier of fact, misrepresentations, indeterminate, promise, notice, public accountant, of the Law, transactions, fictitious, suspicion, importer, omission, ledger

Torts, Standards of Care, Special Care, General Overview, Malpractice & Professional Liability, Professional Services, Business Torts, Fraud & Misrepresentation, Criminal Law & Procedure, Fraud, Securities Fraud, Elements, Duty, Affirmative Duty to Act, Failure to Act, Negligent Misrepresentation, Contracts Law, Third Parties, Beneficiaries, Claims & Enforcement, Banking Law, International Banking, Bonds, Guarantees & Letters of Credit, Evidence, Inferences & Presumptions, Inferences, Business & Corporate Compliance, Contracts Law, Standards of Performance, Discharge & Termination, Defenses, Entrapment, Constitutional Law, Separation of Powers, Affirmative Defenses, Negligence, Vicarious Liability, Employers