POLIFLY GAS, INC. VS. HAROLD G. SCHRADER, JR., Â(L-5472-13, BERGEN COUNTY AND STATEWIDE)
A-2805-14T2
| N.J. Super. Ct. App. Div. | Jun 14, 2017Background
- Plaintiffs (Polifly Gas, Gurinder/Rupinder Singh) bought a Hackensack gas station closing Jan 18, 2012; sale price $1.5M with $1.1M seller financing. Contract included "as‑is" clause, buyers' covenant to remediate/obtain NFA within five years, and buyers' agreement to install two new USTs within five years.
- After closing plaintiffs discovered interstitial water/outer‑hull breaches in multiple underground storage tanks (USTs), forcing shutdown, tank replacement, business losses and remediation costs.
- Plaintiffs sued (fraud, equitable fraud, negligence) alleging defendants knew of breaches, concealed monitoring alarms and records (Veeder‑Root), and provided misleading environmental reports.
- Defendants moved to dismiss under R. 4:6‑2(e) and submitted certifications and contract/environmental documents; plaintiffs opposed with certifications and an expert opinion (disputing that interstitial water equals outer‑hull breach).
- The trial court relied on materials beyond the complaint (contract, reports, certifications), treated the record as if it established disclosure and buyer sophistication, dismissed the complaint (and later clarified dismissal with prejudice) and denied leave to amend.
- Appellate court reversed and remanded because the trial court improperly resolved factual disputes and converted the Rule 4:6‑2(e) motion into a summary judgment style inquiry without applying summary judgment procedures or permitting amendment.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the motion was properly decided under R. 4:6‑2(e) (motion to dismiss) | Singh: court should have accepted complaint facts and reasonable inferences; not resolve factual disputes before discovery | Schrader: documents outside complaint justified treating motion as summary judgment; disclosures defeat claims | Court: trial judge erroneously relied on matters outside complaint without converting to or applying R. 4:46; dismissal under R. 4:6‑2(e) was improper; remand required |
| Sufficiency of fraud/equitable fraud allegations | Plaintiffs: alleged active concealment of monitoring alarms, false environmental reports, and reliance causing damages | Defendants: contract and due diligence disclosures (reports, UST issues, as‑is clause) showed no actionable fraud | Court: trial court prematurely resolved factual disputes about disclosure and reliance; plaintiffs' allegations should have survived a proper R. 4:6‑2(e) analysis; remand for proper consideration |
| Sufficiency of negligence claim | Plaintiffs: defendants had duty to monitor/maintain USTs and breached it causing harm | Defendants: contractual allocation of remediation and express disclaimers/waiver, plus buyers' knowledge and industry expertise, defeat negligence | Court: whether duty, breach and reliance exist are fact questions; trial court improperly decided them at pleading stage; remand required |
| Denial of leave to amend and dismissal with prejudice | Plaintiffs: dismissal should be without prejudice and they should be allowed to amend | Defendants: existing record and disclosures justify dismissal with prejudice | Court: dismissals under R. 4:6‑2(e) ordinarily without prejudice; trial court erred in dismissing with prejudice and denying amendment without properly applying pleading‑stage standards |
Key Cases Cited
- Printing Mart‑Morristown v. Sharp Elecs. Corp., 116 N.J. 739 (1989) (pleading standard: courts must accept complaint facts and reasonable inferences; liberally search complaints for viable claims)
- Roa v. Roa, 200 N.J. 555 (2010) (motions to dismiss under R. 4:6‑2(e) must be based on the pleadings; conversion to summary judgment requires Rule 4:46 procedures)
- Banco Popular N. Am. v. Gandi, 184 N.J. 161 (2005) (the complaint includes attached exhibits, public records, and documents that form the basis of a claim)
- Gennari v. Weichert Co. Realtors, 148 N.J. 582 (1997) (elements of common‑law fraud: material misrepresentation, knowledge of falsity, intent to induce reliance, reasonable reliance, damages)
- Jewish Ctr. of Sussex Cnty. v. Whale, 86 N.J. 619 (1981) (equitable fraud does not require scienter as an essential element)
- Nostrame v. Santiago, 213 N.J. 109 (2013) (dismissals under R. 4:6‑2(e) should ordinarily be without prejudice and leave to amend generally permitted)