NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION This opinion shall not "constitute precedent or be binding upon any court."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