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Raritan River Steel Co. v. Cherry, Bekaert & Holland

North Carolina Supreme Court
407 S.E.2d 178 (1991)


Facts

Cherry, Bekaert & Holland (the firm) (defendant) entered into a contract with Intercontinental Metals Corporation (IMC), under which the firm agreed to audit IMC’s financial statements. The firm issued a qualified opinion on IMC’s 1981 financial statements, indicating uncertainty about a $20 million dispute with a supplier. A summary of the firm’s 1981 audit was published in a Dun & Bradstreet report. That summary showed IMC’s net worth to be $6.9 million, when in fact it was negative $14.6 million. Raritan River Steel Company (Raritan) (plaintiff) was a trade creditor of IMC and had provided IMC with a $1.5 million line of credit. Raritan was unable to obtain a copy of IMC’s 1981 financial statements. Based on the summary of the firm’s audit provided in the Dun & Bradstreet report, Raritan extended additional credit to IMC. IMC later filed for bankruptcy, and Raritan was able to recover only a portion of the amount owed to it. Raritan sued the firm, arguing that: (1) it was a third-party intended beneficiary of the contract between the firm and IMC and (2) the firm had breached the contract by failing to follow proper accounting standards in its audit. The trial court granted summary judgment in favor of the firm. The court of appeals reversed, and the firm appealed.

Rule of Law

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Issue

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Holding and Reasoning (Meyer, J.)

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  • A "yes" or "no" answer to the question framed in the issue section;
  • A summary of the majority or plurality opinion, using the CREAC method; and
  • The procedural disposition (e.g. reversed and remanded, affirmed, etc.).

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