Court Opinion

ID: 4178986
Source: CourtListenerOpinion
Date Created: 2017-06-20 14:12:40.842318+00
Date Added: 2024-06-11T14:38:45.388653
License: Public Domain

NOT FOR PUBLICATION WITHOUT THE
                      APPROVAL OF THE APPELLATE DIVISION
     This opinion shall not "constitute precedent or be binding upon any court."
      Although it is posted on the internet, this opinion is binding only on the
         parties in the case and its use in other cases is limited. R.1:36-3.

                                       SUPERIOR COURT OF NEW JERSEY
                                       APPELLATE DIVISION
                                       DOCKET NO. A-2805-14T2

POLIFLY GAS, INC.,
GURINDER SINGH1 and
RUPINDER SINGH,

        Plaintiffs-Appellants,

v.

HAROLD G. SCHRADER, JR.
and RHEA SCHRADER,

        Defendants-Respondents.

____________________________________________

              Argued on October 13, 2016 – Decided June 14, 2017

              Before Judges Simonelli, Carroll and Gooden
              Brown.

              On appeal from the Superior Court of New
              Jersey, Law Division, Bergen County, Docket
              No. L-5472-13.

              Paul S. Doherty, III, argued the cause for
              appellants (Hartmann Doherty Rosa Berman &
              Bulbulia, LLC, attorneys; Mr. Doherty and
              Robin D. Fineman, on the briefs).

              Jeffrey C. Mason           argued    the    cause    for
              respondents.

1
  Gurinder Singh alternately appears as Gurinderjit Singh in the
record.
PER CURIAM

     Polifly   Gas,   Inc.,   Gurinder   Singh   and   Rupinder     Singh

(collectively, plaintiffs) appeal from the January 9 and June 3,

2015 Law Division orders dismissing their complaint with prejudice

pursuant to Rule 4:6-2(e) and denying their motion for leave to

amend the complaint. Plaintiffs argue that "the trial court failed

to follow the standard of review on a motion to dismiss and instead

looked beyond the face of the [c]omplaint to consider questions

of fact that were not properly before the court."           Plaintiffs

assert that in so doing, the court "improperly resolved multiple

issues of fact before any discovery had been completed."      We agree

and reverse.

                                  I.

     The dispute stems from the sale of a Hackensack gas station

located at 150 Polifly Road (hereinafter, the property).               The

owners of the gas station, defendants Harold and Rhea Schrader,

entered into an agreement on October 25, 2011, to sell the property

to plaintiffs for $1.5 million.   Defendants agreed to finance $1.1

million of the purchase price.         When the contract was signed,

there were four underground storage tanks (USTs) on the property

that played a prominent role in the operation of the gas station.

The closing took place on January 18, 2012.

                                  2                               A-2805-14T2
     Shortly    after    the   closing,    plaintiffs    discovered      that    a

number of the USTs had an interstitial breach of their outer hulls.

The tanks are designed with two containers, an inner steel drum

and an outer fiberglass drum to prevent petroleum from seeping

into the surrounding soil and groundwater.         An interstitial breach

occurs when a crack or hole forms in the outer container, leading

to water accumulating in the interstitial region.            As a result of

the breach, the station was closed in order to replace the damaged

tanks,    causing   plaintiffs    to   lose   business    and    incur     other

expenses.

     On July 15, 2013, plaintiffs filed a three-count complaint

against     defendants    alleging     fraud,    equitable       fraud,       and

negligence, respectively, and seeking compensatory and punitive

damages or reformation of the contract of sale.                 In count one,

plaintiffs alleged that defendants were aware of the interstitial

breaches and the tank monitoring system records confirming the

breaches; defendants knowingly concealed the information from

plaintiffs in the negotiation, agreement and sale of the property;

plaintiffs relied on defendants' false representations of the

condition of the USTs; and plaintiffs suffered damages as a result.

In count two, plaintiffs alleged that, in the event defendants

were unaware of the interstitial breaches, then defendants were

                                       3                                 A-2805-14T2
liable to plaintiffs for equitable fraud for the damages plaintiffs

suffered.

      In count three, plaintiffs alleged that, by statute and

operation of law, defendants "were under a duty to use reasonable

care in the inspection, maintenance and monitoring of the UST

systems[.]"        However, defendants "negligently, carelessly and

recklessly failed and neglected to adopt proper monitoring of the

USTs in question, failed to have proper maintenance and monitoring

via cathodic device and otherwise, and failed in general to

ascertain    the    breaches"       of    the    outer   hulls.      According    to

plaintiffs, "[a]s a direct and proximate result" of defendants'

"negligence, carelessness and recklessness[,]" plaintiffs suffered

damages.

      In response to plaintiffs' complaint, on October 9, 2014,

defendants filed a motion to dismiss pursuant to Rule 4:6-2(e) for

failure to state a claim upon which relief may be granted.                        To

support the motion, defendants submitted the certification of

defendant Rhea Schrader (Ms. Schrader) and appended a copy of the

contract    of    sale.      Ms.    Schrader       certified    that   during    the

negotiations, plaintiffs "were made aware that the property was

the   subject      of   an   [ongoing]          environmental     remediation    and

monitoring       (clean-up),       with    the     New   Jersey    Department     of

Environmental Protection (NJDEP) under case no. 08-10-13-1651-

                                           4                               A-2805-14T2
15[.]"    Ms. Schrader averred that plaintiffs were also made aware

that, if the business was not sold, defendants were "planning to

install new [USTs] at the station to replace and upgrade the

existing USTs, within the upcoming months."   Further, Ms. Schrader

certified that plaintiffs proceeded with the purchase aware of

"the clean-up and the required installation of new USTs[,]" both

of which were expressly provided for in the terms of the contract,

whereby plaintiffs agreed to assume and undertake responsibility

for both at their cost and expense.

     According to Ms. Schrader, Section 8 of the contract, entitled

"Purchaser's Covenants[,]" provided in pertinent part that:

            Purchasers have secured the services of a
            licensed environmental consultant to prepare
            and execute a plan to remediate soil and
            groundwater contamination under NJDEP case
            number 08-10-13-1651-15, and Purchasers will
            submit a remediation certification with the
            NJDEP, for remediation and will diligently
            pursue and obtain a No Further Action letter
            (NFA) or its equivalent as to soils and
            groundwater from the NJDEP for the subject
            case and will endeavor to perform all required
            work to deliver same to Sellers within five
            years, post-closing.

Section     24    of    the    contract,   entitled    "Purchasers'

Representations[,]" provided in pertinent part that:

            C. The purchasers shall buy and install [two]
            new USTs at the premises, at purchasers' cost,
            within five (5) years of closing.

                                  5                          A-2805-14T2
            D. The purchasers are experienced in the
            gasoline service station business and have the
            expertise    and   sufficient    capital    to
            competently operate the business assets that
            are the subject of this sale.

     Ms.    Schrader     averred    further    that    the   contract   provided

plaintiffs with a due diligence period until October 14, 2011, "to

investigate the property, the NJDEP case history . . . and all

aspects of the business and its equipment and operation, including

the USTs," in order to decide whether to go forward with the

purchase.      Ms.   Schrader      certified    that    in   conjunction     with

affording plaintiffs the "unfettered right to cancel the agreement

under the due diligence provision," section 16 of the contract,

entitled    "'As   Is'   Sale;     Risk   of   Loss;   Condition   of   Subject

Premises[,]" provided that:

            Purchasers acknowledge that [p]urchasers have
            fully and thoroughly inspected and examined
            the   [s]ubject   [p]remises,   the   fixtures
            appurtenant to same and that [p]urchasers
            shall accept same in "[a]s [i]s" condition and
            "[w]ith [a]ll [f]aults" as of the date hereof
            and the [c]losing.      Sellers disclaim all
            warranties, express or implied, as to any
            defects, patent or latent.

                 A. Sellers make[] no representations as
            to the (i) structural condition of the roofs,
            floors, walls or any other part of the
            [s]ubject [p]remises, (ii) the systems in or
            affecting the [s]ubject [p]remises[,] (iii)
            the environmental condition of the [s]ubject
            [p]remises, except that sellers have delivered
            all environmental reports in their possession
            to purchasers, (iv) any other matter relating

                                          6                              A-2805-14T2
            to or affecting the structural or non-
            structural   condition   of   the   [s]ubject
            [p]remises and the fixtures appurtenant to
            same. Purchasers hereby unconditionally and
            irrevocably waive and release any and all
            actual and potential rights [p]urchasers may
            have regarding any warranty, express or
            implied, of any type or kind, relating to the
            property, such waiver and release being
            absolute,     unconditional,     irrevocable,
            complete, total and unlimited in any way.
            This waiver and release includes but is not
            limited to a waiver and release of express
            warranties, implied warranties, warranties
            for   a   particular   use,   warranties   of
            merchantability, warranties of habitability,
            strict liability rights and claims of every
            kind and type including but not limited to
            product liability type claims and all rights
            and claims relating to or attributable to
            environmental conditions on or emanating from
            the property.   This provision shall survive
            the closing of title.

                 B. This [a]greement is entered into with
            [p]urchasers' full knowledge as to the value
            of the [s]ubject [p]remises and not upon any
            representations as to the value, character,
            quality or condition thereof, their fitness
            for any particular use, the collectability of
            rents, issues and profits thereof and except
            as   otherwise   explicitly   stated   herein,
            [s]ellers make[] no representations with
            respect thereto and assumes no responsibility
            or liability with respect to or account of any
            condition which may exist.

    In addition, according to Ms. Schrader, section 23 of the

contract,     entitled   "Sellers'       Representation[,]"   specified

defendants'    representations   relating      to   the   environmental

condition of the property and the USTs as follows:

                                     7                          A-2805-14T2
            C.   UST Project: Sellers shall supply [two]
            MPDs and computer system to purchasers at no
            additional cost.    (Purchasers to buy and
            install [two] new UST's and install the MPDs
            at purchasers' cost).

            D.   Environmental Reports. Sellers make no
            representations    with   respect    to    the
            environmental condition of the [s]ubject
            [p]remises   except   as  contained   in   any
            environmental     reports     of      sellers'
            environmental    consultants    supplied    to
            purchasers. Sellers shall have no liability
            to [p]urchasers for any claims by the
            [p]urchasers or third parties based on the
            presence of [h]azardous [s]ubstances, at,
            under or on the [s]ubject premises.

Ms. Schrader certified that plaintiffs "investigated the property

and the business with the assistance of legal counsel and their

environmental consultant" and "did not exercise their right to

cancel the [c]ontract under the due diligence clause" but instead

"went forward with the purchase" and "agreed to an unconditional

and irrevocable waiver and release of claims 'of every kind and

type[.]'"

      In    opposing   defendants'     motion     to   dismiss,    plaintiffs

submitted a certification in which plaintiff Gurinderjit Singh

(Mr. Singh) averred that plaintiffs purchased the property relying

on   "the   accuracy   of   the    information"    contained      in   "various

environmental     reports    and    system   print     outs"   provided        by

defendants as well as defendants' oral representations that "the

only remediation remaining was to the [groundwater]."                  However,

                                      8                                 A-2805-14T2
Mr. Singh certified that he "discovered after the purchase that

of the four (4) USTs on the site at the time of purchase, three

(3) had breaches in their outer hull, otherwise called interstitial

breaches" which rendered "the tanks unusable in the eyes of the

New Jersey DEP."   Mr. Singh asserted that although he "had agreed

to replace the USTs over a five (5) year period from the date of

closing[,]" since the interstitial breach prevented the tanks from

being utilized, the DEP "shut down the station completely for over

four months[,]" and the remediation became "greater than that

which   was   represented   to   [plaintiffs]   at   the   time   of   the

negotiation of the contract."

     According to Mr. Singh, although "all of the USTs were

monitored by a Veeder Root tank monitoring system which immediately

sounds an alarm when [an] interstitial breach occurs" and generates

"a written printout of the breach[,]" he "was advised after the

closing by the DEP that the underground probe that detects outer

hull breaches had been removed from the Veeder Root system" and

the system was "tampered with" to "indicate that all systems were

operating normally."   Mr. Singh certified that although the breach

existed prior to the sale and "the alarm from the Veeder Root

system should have sounded," defendants concealed the breach by

removing the alarm monitor "from the USTs, to prevent the Veeder

Root system from sounding an alarm" during his examination of the

                                    9                             A-2805-14T2
tanks.       Further,   Mr.    Singh    averred   that   defendants    provided

documents to his environmental reviewer "which contained no Veeder

Root alarms or printouts indicating an interstitial breach."

      In a reply certification, Ms. Schrader disputed plaintiffs'

claims.      Ms. Schrader averred that the "UST reports supplied to

plaintiffs in September 2011 included UST tank testing results

performed by ATS Environmental Services" (ATS), disclosing water

in the interstitial cavity of all the gasoline tanks, as well as

the   July      27,   2011    summary    report   performed      by   T.     Slack

Environmental Services (TSES), the company hired by defendants to

assist them with DEP compliance, recommending against invasive

remediation until "the final disposition of the existing tanks."

Ms. Schrader also denied any alteration to the tank monitoring

system    and    certified    that     the   property    "had   the   Incon     UST

monitoring system and not the Veeder Root system."

      According to Ms. Schrader, the Incon system provides "data

about the operation of the USTs through the generation of Automatic

Tank Gauge [ATG] [r]eports" which "relate to the integrity of the

tank walls and the intrusion of water into the tank." Ms. Schrader

certified that the ATG weekly reports, which are maintained on the

premises "at all times" for DEP inspections and are "required to

maintain UST insurance[,]" were provided to plaintiffs in order

to obtain new UST insurance.            In addition, Ms. Schrader asserted

                                        10                                 A-2805-14T2
that the necessity for UST upgrades was specifically contemplated

in the negotiation of the contract, and the scope and cost of the

project were disclosed to plaintiffs by their own environmental

consultant,   SSS   Construction   Company,   whose   proposal   totaled

approximately $246,300, as well as defendants' consultant, T.

Slack Environmental Services, whose proposal totaled approximately

$337,002.    Both proposals included the installation of the Veeder

Root system and reserved additional costs for excavation, soil

disposal and removal of contaminated soil.

     On December 5, 2014, following oral argument, the court ruled

as follows:

                 It's obvious to this [c]ourt from the
            exhibits that are provided . . . that there
            was disclosure to [plaintiffs] that there were
            problems here and things had to be done.

                 And they had full access to the NJ DEP
            files and they hired their own individuals to
            review the situation. The . . . allegation
            that somehow there was a fraud and just to say
            there's a fraud, I mean, at this point there
            should be something that you have to show that
            there was a fraud perpetrated on your client
            by . . . something.

                 I mean, I can't remember seeing something
            with such full disclosure at a time of a
            closing having to do with an environmental
            matter as this, having to do with the sale of
            the property. I'm going to be granting the
            application.

                                   11                            A-2805-14T2
    In response to plaintiffs' attorney's inquiry whether the

motion was "being granted as a summary judgment . . . as opposed

to a dismissal under Rule 4:6-2[,]" the court replied:

              I am granting the application to dismiss
         this complaint for all of the reasons set
         forth on the record, not on the basis of
         summary judgment, because summary judgment
         would require a different analysis but based
         upon everything before this [c]ourt, and you
         certainly could have given other documents to
         this [c]ourt.

The following colloquy then ensued:

         [PLAINTIFFS' ATTORNEY]: I'm not allowed to
         respond.

         THE COURT: Okay. I'm not going to have any
         further oral argument today.     I'm going to
         give you two weeks to give me a surreply to
         the reply and then I'll determine whether or
         not we're going to have further oral argument.

              . . . .

         [DEFENDANTS' ATTORNEY]: [W]ith respect to the
         materials   that   were    supplied   in   the
         certification of Ms. Schrader relating to
         matters outside of the complaint and the
         pleading, I believe under any analysis that
         includes Rule 4:6-2 motion to dismiss and Rule
         4:46 motion for summary judgment when matters
         outside of the pleading are presented, and
         it's my apology for not clearly briefing this
         issue, the matter becomes a motion for summary
         judgment and must be analyzed on that basis.

              Because    this     certification    was
         submitted, I would submit to the [c]ourt that
         we would . . . like an opportunity to more
         thoroughly brief that for the [c]ourt's
         benefit.

                              12                          A-2805-14T2
            THE COURT: Okay.

     Thereafter, in a certification submitted to the court in

opposition to the motion, Mr. Singh certified that the documents

provided by defendants did not constitute proof of an outer hull

breach because such a breach would have required defendants to

promptly    cease   operations   and    notify    DEP,   neither   of     which

occurred.     According to Mr. Singh, had he been advised of an outer

hull breach that required immediate removal and replacement of the

USTs, rather than the five years specified in the contract, he

"would never have proceeded with the closing."                 In support,

plaintiffs submitted the certification of a purported expert,

Peter A. Ianzano, Jr., who opined that water accumulating "in the

interstitial zone between the inner and outer hulls of a UST is

not proof of an outer hull breach" and can be rectified without

replacing the UST.

     On January 9, 2015, following additional oral argument that

did not address the applicable standard, the court again ruled for

defendants and entered an order dismissing the complaint.                    The

court viewed the sophistication of the parties and the manner in

which   the    negotiations    progressed    as    important   factors         in

evaluating the motion.     The court explained:

                 [Plaintiffs]   are   very   sophisticated
            purchasers in the field of gas stations. This

                                   13                                   A-2805-14T2
is their family business.     This is their
business. The negotiated sale price was 1.5
million.    [Plaintiffs] requested that the
defendants . . . provide financing of 1.1
million to complete the purchase . . . .

     This is an important factor for the
[c]ourt because clearly the sellers of the
property had an interest in the business being
successful going forward.

     Now [plaintiffs] were unequivocally made
aware that the property was subject of an
ongoing    environmental   remediation    and
monitoring cleanup with the New Jersey DEP
. . . and that H&R, Inc. was planning to
install new underground storage tanks at the
station to replace and upgrade the existing
USTs within upcoming months if the defendants
did not sell the business.

     [Plaintiffs]    nonetheless   were   very
interested in going forward with the purchase
and the facts of the cleanup and the required
installation of the new USTs were expressly
provided for in the terms of the contract,
whereby [plaintiffs] agreed to assume and
undertake responsibility for the cleanup and
to install new USTs, all at [plaintiffs]' cost
and expense.

     . . . .

     The contract provided [plaintiffs] with
a due diligence to investigate the property,
the New Jersey DEP case history, and all
aspects of the business and its equipment and
operation, including the USTs, and to decide
whether or not to go forward with the purchase
or cancel the contract for any reason, in
their complete discretion.

     The contract includes representations
that [plaintiffs] would undertake the cleanup
and install the new USTs and that they had the

                     14                          A-2805-14T2
          experience and expertise to operate the gas
          station business.

     In rendering its decision, the court relied on the express

terms of the contract, particularly the provision "that the sale

is, 'as is, with all faults, and that the sellers disclaim all

warranties, expressed or implied, as to any defects patent or

latent and make no representation regarding the condition of the

business or the property.'"        Further, the court underscored the

provision specifying "an unconditional and irrevocable waiver and

release of sellers from any future claim alleging defects in the

property or business property being sold."           The court noted that

plaintiffs   "investigated   the    property   and    the   business   with

assistance of legal counsel and their environmental consultant"

and "were satisfied with the business and property and did not

exercise their right to cancel the contract under the due diligence

clause" but instead "continued with the purchase, and proceeded

to schedule a closing."

     Regarding the seller's representations relating to the UST

project and the environmental condition of the property, the court

noted:

               Now   the    UST    report   supplied   to
          [plaintiffs]   in    due   diligence   actually
          disclosed water in the interstitial cavity of
          all gasoline tanks. The September, 2011 due
          diligence   package    .   .   .  supplied   to
          [plaintiffs] included the UST tank testing

                                   15                              A-2805-14T2
         results   performed   by   ATS    Environmental
         Services and this [c]ourt has reviewed the
         report, it was attached . . . to Ms. Schrader's
         reply    certification,     and    it    states
         specifically there is a 33-inch water in all
         gasoline tank interstitial with sensors pulled
         up.

              Therefore, Mr. Singh knew about the
         condition of the USTs in the course of due
         diligence . . . well in advance of closing.
         It is respectfully submitted . . . that no one
         with his background and experience in the
         operation of gas stations and in this industry
         would buy a gas station without first
         examining the UST reports required under state
         regulations.

              The September, 2011 due diligence package
         . . . supplied to the purchaser included the
         summary report of groundwater investigation
         requirements . . . performed by T. Slack
         Environmental Services dated July 27, 2011.

              The TSES summary report concludes any
         further remediation plans will depend upon the
         final disposition of the existing tanks.
         Until this is determined, TSES does not
         recommend any invasive remediation.

              He understood the significance of the ATS
         tank testing report and the TSES summary
         report supplied to him in the course of due
         diligence. What was clear is the UST project
         was   necessary   and  the   final   cost   of
         remediation was unknown.

    Regarding   plaintiffs'   allegations   that   the   Veeder   Root

monitoring system was tampered with, the court found:

              Now the station had the icon TS-1000 UST
         monitoring system, not the [Veeder Root]
         monitoring system, as is suggested by all of
         the papers submitted by the plaintiff.

                               16                             A-2805-14T2
               Mr. Singh was not misled by any
          fraudulent altering of the [Veeder Root] tank
          monitoring system and had all of the
          documentation that has been provided to the
          [c]ourt and nonetheless he still chose to go
          forward   with   this  purchase   under   the
          conditions clearly set forth in the contract.

The court also determined that

               [T]he scope and cost of the UST upgrade
          was disclosed to Mr. Singh in the course of
          due diligence by Singh's own environmental
          consultant, who proposed an installation of
          the [Veeder Root] system.

               He was unequivocally aware the entire UST
          project involved removal of soils from the
          property, the final volume of which could not
          be determined, and Mr. Singh elected to
          purchase.

The court concluded:

               Accordingly, there is no basis for
          plaintiff's   complaint.       There   is   no
          contractual fraud.     There is no equitable
          fraud. And no further discovery will change
          the facts of what he clearly knew, what he was
          allowed to investigate, what his own attorney,
          what his own consultants advised him, what he
          himself knew as being a professional in the
          industry, and all of the disclosures the
          [c]ourt has been able to review and that Mr.
          Singh and his professionals had in their
          possession.

     Plaintiffs then moved for clarification on whether or not the

dismissal was with prejudice or without, and to amend their

complaint to include breach of contract and breach of implied duty

of good faith counts.   Those counts alleged that the environmental

                                 17                         A-2805-14T2
reports provided by defendants, including the April 27, 2011 ATS

Report, falsely represented the condition of the USTs.              It was

alleged that those false representations breached the provision

of   the    contract   in   which   defendants      represented   that   the

information contained in the environmental reports were true and

accurate and breached the implied covenant of good faith and fair

dealing inherent in the contract.              On June 3, 2015, the court

clarified that the complaint was dismissed with prejudice and

denied plaintiffs' motion to amend the complaint.             This appeal

followed.

                                         II.

     We review a decision to dismiss a complaint as a matter of

law under Rule 4:6-2(e) de novo, using the same standards relied

on by the motion judge.       Assuming arguendo that the facts stated

within the four corners of the complaint are true, and granting

plaintiff the benefit of all rational inferences that can be drawn

from such facts, we must determine:

            whether a cause of action is "suggested" by
            the facts. In reviewing a complaint dismissed
            under Rule 4:6-2(e) our inquiry is limited to
            examining the legal sufficiency of the facts
            alleged on the face of the complaint.
            However, a reviewing court "searches the
            complaint in depth and with liberality to
            ascertain whether the fundament of a cause of
            action may be gleaned even from an obscure
            statement of claim, opportunity being given
            to amend if necessary." At this preliminary

                                    18                              A-2805-14T2
          stage of the litigation the Court is not
          concerned with the ability of plaintiffs to
          prove   the  allegation   contained  in   the
          complaint.      For  purposes   of   analysis
          plaintiffs are entitled to every reasonable
          inference of fact.     The examination of a
          complaint's allegations of fact required by
          the aforestated principles should be one that
          is at once painstaking and undertaken with a
          generous and hospitable approach.

          [Printing Mart-Morristown v. Sharp Elecs.
          Corp., 116 N.J. 739, 746 (1989) (citations
          omitted).]

     Thus, a motion to dismiss under Rule 4:6-2(e) "must be based

on the pleadings themselves."        Roa v. Roa, 200 N.J. 555, 562

(2010).   For purposes of such a motion, the "complaint" includes

the "'exhibits attached to the complaint, matters of public record,

and documents that form the basis of a claim.'"    Banco Popular N.

Am. v. Gandi, 184 N.J. 161, 183 (2005) (quoting Lum v. Bank of

Am., 361 F.3d 217, 222 n.3 (3d Cir.), cert. denied, 543 U.S. 918,

125 S. Ct. 271, 160 L. Ed. 2d 203 (2004)).    However,

          If . . . matters outside the pleading are
          presented to and not excluded by the court,
          the motion shall be treated as one for summary
          judgment and disposed of as provided by R.
          4:46, and all parties shall be given
          reasonable opportunity to present all material
          pertinent to such a motion.

          [R. 4:6-2].

     Here, the court clearly looked outside the pleadings and went

far beyond the four corners of the complaint when it considered

                                19                          A-2805-14T2
the factual and procedural history of the dispute between the

parties.      In fact, the court afforded the parties the opportunity

to present additional materials pertinent to the motion.                           In so

doing, the court converted the Rule 4:6-2(e) motion into a Rule

4:46 summary judgment motion.          Pressler, Current N.J. Court Rules,

comment 4.1.2. on R. 4:6-2 (2017); see also Roa, supra, 200 N.J.

at   562.      However,    the    court     expressly          found   "no   basis    for

plaintiff's complaint" and dismissed the complaint for failure to

state a claim upon which relief can be granted and "not on the

basis of summary judgment, because summary judgment would require

a different analysis[,]" one in which the court did not engage.

      That     said,     because      the       court         purportedly      dismissed

plaintiffs'        complaint    pursuant       to    Rule     4:6-2(e),   we    consider

whether      the    complaint    is   capable            of   withstanding     dismissal

pursuant to a proper application of that rule.                      In dismissing the

complaint, the court rejected plaintiffs' claims based on its

evaluation of conflicting certifications and its determination

that plaintiffs were unable to prove their allegations.                         However,

at this stage in the proceeding, in determining whether dismissal

under Rule 4:6-2(e) was warranted, the court should not concern

itself      with   plaintiffs'     ability          to    prove   their   allegations.

Printing Mart-Morristown, supra, 116 N.J. at 746.

                                          20                                     A-2805-14T2
     Rather, the court's focus should have been whether plaintiffs

alleged sufficient facts that, if proven, would establish fraud,

the elements of which are: "(1) a material misrepresentation of a

presently existing or past fact; (2) knowledge or belief by the

defendant of its falsity; (3) an intention that the other person

rely on it; (4) reasonable reliance thereon by the other person;

and (5) resulting damages."     Gennari v. Weichert Co. Realtors, 148

N.J. 582, 610 (1997) (citing Jewish Ctr. of Sussex Cnty. v. Whale,

86 N.J. 619, 624-25 (1981)). Moreover, in order to prove equitable

fraud, "[t]he elements of scienter, that is, knowledge of the

falsity and an intention to obtain an undue advantage therefrom

. . . are not essential[.]"         Jewish Ctr. of Sussex Cnty., supra,

86 N.J. at 625 (citation omitted).

     To sue for negligence, a plaintiff need only allege facts to

show that "a defendant owed a duty of care, the defendant breached

that duty, and injury was proximately caused by the breach."

Siddons   v.   Cook,   382   N.J.   Super.   1,   13   (App.   Div.    2005).

Foreseeability of the risk of harm is the foundational "fact-

specific" element in the determination of whether a duty exists.

Williamson v. Waldman, 150 N.J. 232, 239 (1997); Hopkins v. Fox &

Lazo Realtors, 132 N.J. 426, 439 (1993).          As such, defendants are

considered to have a duty if in a position to discover the risk,

                                     21                               A-2805-14T2
or would have reason to know that plaintiffs would suffer a

particular injury.    J.S. v. R.T.H., 155 N.J. 330, 337-38 (1998).

     To further compound the error, although "dismissals pursuant

to Rule 4:6-2(e) should ordinarily be without prejudice and . . .

plaintiffs   generally    should   be   permitted   to     file   an   amended

complaint[,]" Nostrame v. Santiago, 213 N.J. 109, 128 (2013), the

court   dismissed   the   complaint     with   prejudice    without     giving

plaintiffs an opportunity to amend.            From our review, we are

satisfied that the court considered documents well beyond the four

corners of plaintiffs' complaint in deciding the motion.               Because

the court did not convert the motion into a Rule 4:46 motion for

summary judgment or apply the appropriate standard for a Rule 4:6-

2(e) motion, we are constrained to reverse and remand.             We do not

offer any opinion on the merits of any of plaintiffs' claims and,

on remand, defendants may assert any and all defenses and may file

the appropriate application anew.

     Reversed and remanded for further proceedings consistent with

this opinion.   We do not retain jurisdiction.

                                   22                                  A-2805-14T2