Court Opinion

ID: 9909433
Source: CourtListenerOpinion
Date Created: 2023-12-13 15:06:13.779275+00
Date Added: 2024-06-11T12:49:19.909799
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NOT FOR PUBLICATION WITHOUT THE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-2022-21

SEASIDE PROPERTIES, LLC,

          Plaintiff-Respondent,

v.

ARF REALTY MANAGEMENT
and ARF REALTY INVESTORS
CORP.,

          Defendants/Third-Party
          Plaintiffs-Appellants,

and

PB 24 & 35 CUTTERS DOCK LLC,

          Defendant/Third-Party
          Plaintiff-Respondent,

v.

SEASIDE PROPERTIES, LLC,
WALTER JAKOVCIC, JADRANKA
JAKOVCIC, RICHARD MATERA,
PAMELA MATERA, TITAN
DEMOLITION & SALVAGE LLC,
UNITED WASTE MANAGEMENT,
INC., RAILWAY PROPERTY LLC,
BLUE DOLPHIN FREIGHT
SYSTEMS, INC., CUTTERS DOCK
PROPERTIES LLC, GREEN
AMERICAN TECHNOLOGIES,
INC., d/b/a AMERICAN EAGLE
PALLETS, and MATJAC PALLETS
INC., d/b/a AMERICAN EAGLE
PALLETS,

     Third-Party Defendants-
     Respondents.
________________________________

         Submitted October 16, 2023 – Decided December 13, 2023

         Before Judges Gilson and DeAlmeida.

         On appeal from the Superior Court of New Jersey,
         Chancery Division, Middlesex County, Docket No.
         C-000092-17.

         Jonathan B. Behrins (The Behrins Law Firm), attorney
         for appellants.

         Wilentz, Goldman & Spitzer, PA, attorneys for
         respondents Seaside Properties, LLC, Walter Jakovcic,
         Jadranka Jakovcic, Richard Matera, Pamela Matera,
         Titan Demolition & Salvage LLC, United Waste
         Management, Inc., Railway Property, LLC, Blue
         Dolphin Freight Systems, Inc., Cutters Dock
         Properties, LLC, Green American Technologies, Inc.,
         and Matjac Pallets, Inc. (Willard C. Shih and Richard
         K. Wille, Jr., of counsel and on the brief).

PER CURIAM

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         This matter, involving disputes over discovery, returns to us following a

remand. In November 2018, the trial court entered an order striking with

prejudice the answer, counterclaims, and third-party claims of defendants/third-

party plaintiffs ARF Realty Management and ARF Realty Investors Corp.

(collectively, ARF) for failure to comply with discovery obligations. On the

first appeal, we reversed and remanded, directing the trial court to make specific

findings of fact concerning whether there were grounds to dismiss ARF's claims

with prejudice under Rule 4:23-5. Seaside Props., LLC v. ARF Realty Mgmt.,

No. A-1895-18 (App. Div. June 16, 2020) (slip op. at 3).

         On remand, the trial court conferred with the parties, received additional

submissions, and heard argument from counsel. On January 31, 2022, the trial

court issued a written statement of reasons and order striking ARF's answer and

affirmative claims with prejudice. ARF now appeals from the January 31, 2022

order.

         The dispute is whether ARF provided responsive answers and documents

to discovery demands made by plaintiff/third-party defendant Seaside

Properties, LLC (Seaside) and the other third-party defendants.            Having

reviewed the briefs, record, and law, we affirm in part and reverse in part.

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                                          3
      The record establishes that ARF persistently failed to provide responsive

answers and documents to support its counterclaims against Seaside.

Accordingly, we discern no abuse of discretion in the portion of the trial court's

order dismissing the counterclaims with prejudice.

      The record also establishes that ARF did provide answers and documents

concerning its allegation in its third-party complaint that it gave loans and made

payments on behalf of Seaside and the other third-party defendants. While the

adequacy of ARF's answers and documents can be questioned, they are

sufficiently responsive and, therefore, do not warrant dismissal with prejudice

under Rule 4:23-5. We, therefore, reverse in part and remand with direction that

ARF be allowed to reinstate its third-party complaint. In doing so, however, we

direct that ARF be limited to the information set forth in its responses to

discovery. Specifically, ARF will be limited to its claim that it made loans to

or made payments on behalf of the third-party defendants as set forth in the

October 31, 2018 certification of Antonio Fasolino and the documents identified

in that certification.

                                        I.

      Seaside owns real property located at 34 Cutters Dock Road in

Woodbridge, New Jersey (the Property). Seaside is owned by two members:

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Walter Jakovcic and Richard Matera. In June 2017, Seaside brought this action

against ARF and PB 24 & 35 Cutters Dock, LLC (PB Dock, LLC) seeking to

quiet title to the Property and declare that a mortgage that had been recorded

against the Property and the subsequent assignment of the mortgage were void

and unenforceable. Seaside alleged that ARF had fraudulently prepared and

recorded the mortgage, dated February 1, 2014, on the Property in the amount

of $3,500,000 (the 2014 Mortgage). The 2014 Mortgage had then been assigned

to PB Dock, LLC. Seaside sought to quiet title to the Property and declare the

2014 Mortgage and subsequent assignment void and unenforceable.

      In response to Seaside's complaint, ARF filed an answer and

counterclaims against Seaside. ARF also filed a third-party complaint against

Seaside and various individuals and companies associated with Seaside.

Specifically, ARF named as third-party defendants Seaside, Jakovcic, Matera,

their two wives, and seven companies owned or managed by Jakovcic or Matera:

Titan Demolition & Salvage LLC; United Waste Management, Inc.; Railway

Property LLC; Blue Dolphin Freight Systems, Inc.; Cutters Dock Properties

LLC; Green American Technologies, Inc.; and Matjac Pallets Inc. (collectively,

third-party defendants).

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      In its counterclaims against Seaside, ARF asserted five causes of action

for (1) fraud and misrepresentation; (2) tortious interference; (3) breach of

contract; (4) violations of New Jersey's Racketeer Influenced and Corrupt

Organizations Act (RICO), N.J.S.A. 2C:41-1 to -6.2; and (5) punitive damages

for filing a "frivolous" lawsuit. In its third-party complaint, ARF alleged a

"CAUSE OF ACTION BASED UPON THE DOCTRINE OF NECESSARIES."

Read generously, the third-party complaint alleged that ARF had made loans to

or payments on behalf of the third-party defendants in the amount of

approximately $6 million and it sought repayment "plus the reasonable agreed[-

]upon rate of 12% interest[.]"      The third-party complaint also sought a

declaration that the 2014 Mortgage was "legal and valid."

      The parties then engaged in discovery. In January 2018, Seaside and the

other third-party defendants served interrogatories and document requests on

ARF. ARF responded by producing almost 2,000 pages of documents. Seaside

and the other third-party defendants, however, believed that ARF's discovery

responses were deficient and sent ARF a letter pointing out those deficiencies

and noting that ARF had answered the wrong set of interrogatories. ARF later

provided answers to the correct interrogatories.

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      When the deficiencies were still not resolved to Seaside's satisfaction, it

moved to compel discovery. On April 27, 2018, the trial court entered an order

directing ARF to provide "more specific responses." In addition, in May 2018,

the trial court issued a case management order directing ARF to produce

additional documents by June 8, 2018.

      On July 3, 2018, Seaside and the other third-party defendants moved to

strike ARF's pleadings, including its affirmative claims. ARF did not oppose

that motion, but it did send what it claimed were more "detailed and streamlined"

documents.

      On July 6, 2018, the trial court entered an order striking ARF's pleadings

without prejudice. Shortly thereafter, ARF moved to reinstate its pleadings and

filed an affidavit contending that it had fully complied with the discovery

demands by providing "every document in ARF's possession which was

requested in discovery."

      On August 3, 2018, the trial court denied ARF's motion to reinstate. ARF

then moved for reconsideration and submitted a certification from Antonio

Fasolino, its owner and president. Fasolino asserted that ARF had provided all

requested documents in its possession. In addition, Fasolino had been deposed

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on August 9, 2018. The trial court denied the motion for reconsideration on

September 14, 2018.

      Shortly thereafter, on September 19, 2018, Seaside and the other third-

party defendants sent ARF another discovery deficiency letter. In that letter, the

third-party defendants challenged ARF's answers to interrogatory numbers 10,

11, 27, and 29, and contended that the documents produced in response to

document request numbers 20 and 24 were deficient. Seaside and the other

third-party defendants then filed motions to strike ARF's pleadings with

prejudice under Rule 4:23-5(a)(2).          ARF did not oppose that motion.

Nevertheless, the trial court directed ARF to file a motion to reinstate and

adjourned the motion to strike ARF's pleadings to November 9, 2018. Despite

that adjournment, ARF never moved to reinstate its pleadings.

      On October 31, 2018, Seaside and the other third-party defendants sent

ARF another letter pointing out alleged deficiencies with ARF's response to

document request number 45. That same day, Fasolino submitted a certification

providing some information concerning the alleged loans and payments ARF

had made to or on behalf of the third-party defendants (the October 31, 2018

Fasolino certification). With the Fasolino certification, ARF also produced

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                                        8
documents, some of which it had produced previously, that allegedly supported

its claims.

      On November 9, 2018, the trial court heard oral arguments on the motion

to strike with prejudice. That same day, the court issued an order and opinion

granting the motion. The trial court cited ARF's persistent non-compliance with

discovery requests and failure to file a motion to reinstate.

      ARF moved for reconsideration, arguing that it had complied by

producing the documents and information it had and that striking its answer,

counterclaims, and third-party claim with prejudice was an unfairly harsh

sanction. The trial court denied that motion for reconsideration.

      In its first appeal, ARF challenged the orders striking its pleadings with

prejudice. On June 16, 2020, we issued an opinion reversing the orders and

remanding the matter, instructing the trial court to make specific findings of fact

on whether the deficiencies were cured and, if they were not, whether dismissal

was warranted. Seaside Props., slip op. at 14. We also directed that if the court

could not make specific findings of fact warranting dismissal, then it should

reinstate the pleadings and consider a lesser sanction. See ibid.

      On remand, the trial court conferred with the parties and directed them to

submit supplemental information.      Thereafter, the court heard argument on

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                                        9
March 30, 2021. Ten months later, on January 31, 2022, the trial court issued a

written statement of reasons and order granting the motion to strike ARF's

pleadings with prejudice. In its statement of reasons, the trial court stated, in

part:

                    ARF [] did not comply with its discovery
             obligations to support its multi-million[-]dollar claims.
             ARF [] willfully declined to support these claims by
             referring generally to thousands of pages of discovery.
             This discovery was produced, re-produced, and
             produced again to feign the appearance that ARF [] had
             complied with its discovery obligations.

                   ARF [] failed to demonstrate any facts or
             documents to support its millions of dollars in claims
             and to allow it to move forward with these claims
             without providing documentary proof—much less
             responding to requests seeking specific information
             about the documentary proof—prejudices Seaside.

        In this second appeal, ARF now challenges the January 31, 2022 order.

In its brief on this appeal, Seaside represents that it settled its affirmative claims

with PB Dock, LLC and that on September 13, 2021, the 2014 Mortgage was

discharged. Seaside, therefore, maintains that the only remaining claims in the

litigation are ARF's affirmative claims, which are the subject of this appeal.

Seaside also asserts that some of the loans that ARF made to the third-party

defendants were assigned to PB Dock, LLC and have, therefore, been either

discharged or settled.

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                                         10
                                        II.

      On this appeal, ARF argues that its discovery responses were adequate

and that the trial court made several errors in dismissing its affirmative claims

with prejudice. Additionally, ARF contends that dismissal with prejudice was

an inappropriately harsh sanction and that the trial court did not adequately

consider lesser sanctions or alternative solutions.

      "[T]he standard of review for dismissal of a complaint with prejudice for

discovery misconduct is whether the trial court abused its discretion." Abtrax

Pharms., Inc. v. Elkins-Sinn, Inc., 139 N.J. 499, 517 (1995). Moreover, a trial

court's decision on a discovery matter is "entitled to substantial deference" and

"will not be overturned absent an abuse of discretion." DiFiore v. Pezic, 254

N.J. 212, 228 (2023).

      A.    Rule 4:23-5.

      Failure to comply with a demand for discovery pursuant to Rule 4:17

subjects the non-compliant party to dismissal in accordance with Rule 4:23-5.

R. 4:23-5(a)(1). Rule 4:23-5 creates a two-step dismissal procedure. First, the

compliant party moves for dismissal without prejudice. R. 4:23-5(a)(1). If that

motion is granted, the non-compliant party has sixty days to cure and move to

vacate the dismissal order. R. 4:23-5(a)(2). The compliant party may only move

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                                       11
to dismiss with prejudice after the sixty-day period has expired if the non-

compliant party has not cured the discovery defects. Ibid. The motion to dismiss

with prejudice "shall be granted" unless a motion to vacate was filed by the non-

compliant party and "either the demanded and fully responsive discovery has

been provided or exceptional circumstances are demonstrated." Ibid.

      The goal of the two-step procedure in Rule 4:23-5 is to compel discovery

compliance rather than to dismiss claims. Adedoyin v. Arc of Morris Cnty.

Chapter, Inc., 325 N.J. Super. 173, 180 (App. Div. 1999). "[R]esolution of

disputes on the merits" is preferred over "resolution by default for failure to

comply with procedural requirements." St. James AME Dev. Corp. v. City of

Jersey City, 403 N.J. Super. 480, 484 (App. Div. 2008). "[B]ecause dismissal

with prejudice is 'the ultimate sanction,' it should be imposed 'only sparingly'

and 'normally… ordered only when no lesser sanction will suffice to erase the

prejudice suffered by the non-delinquent party.'" Salazar v. MKGC + Design,

458 N.J. Super. 551, 561-62 (App. Div. 2019) (quoting Robertet Flavors, Inc. v.

Tri-Form Constr. Inc., 203 N.J. 252, 274 (2010)). "However, a party invites this

extreme sanction by deliberately pursuing a course that thwarts persistent efforts

to obtain the necessary facts." Abtrax Pharms., 139 N.J. at 515. In other words,

"the rule affords a party aggrieved by dilatory discovery tactics a remedy t o

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                                       12
compel production of the outstanding discovery and the right to seek final

resolution through the two-step dismissal process." Sullivan v. Coverings &

Installation, Inc., 403 N.J. Super. 86, 96 (App. Div. 2008).

      "[I]n order to cure the default, [Rule] 4:23-5(a)(1) requires the defaulting

party to serve fully responsive answers." Zimmerman v. United Servs. Auto.

Ass'n, 260 N.J. Super. 368, 377 (App. Div. 1992) (internal quotation marks

omitted) (citing R. 4:23-5(a)(1)). Nevertheless, this does not mean that the

discovery production must meet the standards expected or hoped for by the party

demanding discovery:

            [W]hat the answering party in good faith may regard as
            responsive under the circumstances is not necessarily
            congruent with the propounder's view of the matter.
            There is a broad area for bona fide dispute between
            answers which are patently inadequate and a set of
            answers which fully meets the propounder's
            expectations.

            [Ibid.]

      "[W]hen the real discovery dispute is not a failure to answer but rather an

alleged failure to answer in a 'fully responsive' manner, it is the dismissal with

prejudice which is inappropriate unless the answering party has been ordered to

answer more fully and fails to do so." Id. at 378. "[I]ncomplete answers

[cannot] be automatically considered as a failure to answer" warranting

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dismissal under Rule 4:23-5. Adedoyin, 325 N.J. Super. at 180. Moreover,

when evaluating deficiency of answers to interrogatories, the set of answers is

considered as a whole. See Zimmerman, 260 N.J. Super. at 377.

      Under Rule 4:23-5(a)(1), "the focus of the motion judge must be on

whether good cause is present for relief other than a dismissal without prejudice

for failure to answer." Adedoyin, 325 N.J. Super. at 181. Additionally, "[i]f the

set of answers, considered in the context of the specific cause of action and the

progress of discovery to date would have been sufficient to withstand a motion

for dismissal without prejudice under [Rule] 4:23-5(a)(1), then it is also

sufficient to withstand a motion for dismissal with prejudice under [Rule] 4:23-

5(a)(2)."   Zimmerman, 260 N.J. Super. at 377.         Generally, in considering

whether to dismiss claims due to a discovery violation, courts should "assess the

facts, including the willfulness of the violation, the ability of [the non-compliant

party] to produce the certification, the proximity of trial, and prejudice to the

adversary, and apply the appropriate remedy." Casinelli v. Manglapus, 181 N.J.

354, 365 (2004).

      B.    The Discovery Disputes.

      Seaside and the other third-party defendants argue that ARF's answers to

four interrogatories and the documents submitted in response to two document

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requests were non-responsive or deficient and warranted the sanction of

dismissal with prejudice. The specific interrogatories were numbers 10, 11, 27,

and 29. The document requests were numbers 24 and 45.

      Interrogatory numbers 10 and 11 asked ARF to identify its damages

claims by specifying the way in which third-party defendants' conduct damaged

ARF, the specific dollar amount of damages claimed, and the way the alleged

damages were computed. The interrogatories also directed ARF to attach "all

documents that refer or relate to" ARF's answers to the interrogatories. In

response, ARF stated: "[p]laintiffs/third[-]party defendants are respectfully

referred to the [c]ounterclaims and [t]hird-[p]arty [c]omplaint as well as the

accompanying response to demand for documents."

      Interrogatory number 27 required ARF to "[i]dentify all past and present

leases between [ARF] and [p]laintiff/[t]hird[-][p]arty [d]efendants."     ARF

responded:    "[t]he $5,000 lease on 35 Cutters Dock without use of the

Warehouse; access to only the office and grounds."

      Interrogatory number 29 required ARF to identify all loans made by ARF

to Seaside or the other third-party defendants. ARF initially responded to that

interrogatory by stating: "Previous[ly] provided in ARF's response to document

requests."   In the October 31, 2018 Fasolino certification, however, ARF

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                                     15
identified ten loans it allegedly made to Seaside and other third-party

defendants. The certification also included references to the specific documents

that allegedly evidenced the loans.

      Document request number 24 demanded all documents "which refer or

relate to the payment of Escrow of Bulk Sales and issuance of final titles, item

#37 on the closing statement attached as Exhibit C to [ARF's] [c]ounterclaims."

ARF responded:      "See attachments t, u, v, and w," referring to labeled

attachments it had included with its response.

      Document request number 45 asked for all "documents received from[] or

provided to the Federal Bureau of Investigation[] [(FBI)], police or any other

state, local or federal government agency regarding[] [ARF], Antonio Fasolino,

. . . or Fasolino Foods." ARF responded that it did not have any responsive

documents. At his deposition, Fasolino testified that the FBI took all the records

and did not provide him with copies of or an accounting of the documents taken.

      The adequacy of ARF's discovery responses needs to be evaluated in light

of its affirmative claims. In its counterclaims against Seaside, ARF asserted

claims of fraud, misrepresentation, tortious interference, breach of contract,

RICO violations, and punitive damages.        The trial court found that ARF's

discovery responses did not respond to Seaside's requests for information

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                                       16
concerning the specific damages and the facts supporting those damages

asserted in the counterclaims. The trial court noted that it had ordered more

specific responses and ARF failed to provide those responses. Having reviewed

the record, we discern no abuse of discretion in the trial court's determination as

it relates to the counterclaims. In short, ARF simply did not provide Seaside

with any information that would support the counterclaims. Moreover, Seaside

was prejudiced by those non-responses because without that information it could

not prepare a defense or even move for summary judgment.

         In contrast, ARF did provide an answer and documents concerning its

claim that it had given Seaside and the other third-party defendants various

loans.     That information was set forth in the October 31, 2018 Fasolino

certification. As noted, the Fasolino certification identified ten specific alleged

loans to or payments made on behalf of Seaside or the other third-party

defendants. The certification also attached ten exhibits describing the alleged

loans and identifying the documents that purportedly supported the existence of

those loans.

         The trial court never discussed or analyzed in detail the October 31, 2018

Fasolino certification. While ARF never formally amended its response to

interrogatory number 27 to refer to the October 31, 2018 Fasolino certification,

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                                         17
it clearly relied on that certification in opposing the motion to dismiss with

prejudice.

      There are legitimate questions about the sufficiency of the information

provided in the October 31, 2018 Fasolino certification. The dispute over the

adequacy of the discovery responses, however, does not warrant dismissal with

prejudice. Dismissal with prejudice is inappropriate "when the real discovery

dispute is not a failure to answer but rather an alleged failure to answer in a fully

responsive manner." Zimmerman, 260 N.J. Super. at 377 (internal quotation

marks omitted).

      C.     The Scope of the Remand.

      The parties' disputes over discovery have persisted for over five years and

have engendered numerous motions and two appeals. Accordingly, we exercise

original jurisdiction to rule on the specific claims that will be reinstated and the

scope of those claims. See R. 2:10-5 (explaining that an "appellate court may

exercise such original jurisdiction as is necessary to the complete determination

of any matter on review"); Vas v. Roberts, 418 N.J. Super. 509, 523 (App. Div.

2011) (explaining that "[r]esort to original jurisdiction is particularly

appropriate to avoid unnecessary further litigation,"); see also Price v. Himeji,

LLC, 214 N.J. 263, 294-95 (2013) (discussing when exercise of original

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                                        18
jurisdiction is appropriate and noting that "in exercising original jurisdiction, we

apply the same standard and scope of review as would the decision-maker into

whose place we step").

      We hold that the information provided in the October 31, 2018 Fasolino

certification is sufficient to avoid dismissal of the claims in the third-party

complaint. We also hold that that information defines and limits ARF's claims.

In the certification, ARF has identified ten alleged loans and the documents that

allegedly demonstrate that those loans existed. Seaside and the other third-party

defendants have argued that the discovery responses are inadequate because they

cannot evaluate or defend against ARF's claims. We do not agree with that

assertion.

      Discovery has been completed. Therefore, ARF is limited to the specific

information set forth in the October 31, 2018 Fasolino certification and the

specific documents referenced in that certification. In other words, on remand ,

ARF cannot point to any additional loans or documents; rather, it is limited to

what is set forth in the October 31, 2018 Fasolino certification. Consequently,

the claims that ARF had provided loans is identified and defined. Seaside and

the other third-party defendants can therefore evaluate the merits of ARF's

claims and can either move for summary judgment or address the claims at trial.

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      Accordingly, on remand, the trial court is directed to reinstate ARF's third-

party complaint, but limit those claims to the alleged loans. In remanding this

matter, we note that Seaside has contended that its settlement with PB Dock,

LLC resolved some of the alleged loans made by ARF. In that regard, Seaside

has asserted that ARF assigned some of the loans to PB Dock, LLC and those

loans were subsequently discharged. That is also an issue that can be resolved

on remand by motion.

      D.        Summary.

      In summary, we affirm in part and reverse in part. We affirm the portion

of the order dismissing with prejudice all the counterclaims against Seaside. We

reverse the portion of the order dismissing the third-party complaint.          On

remand, ARF's third-party complaint is to be reinstated, but it is to be limited to

the claims that ARF is owed monies based on the ten loans identified in the

October 31, 2018 Fasolino certification.

      Affirmed in part, reversed in part, and remanded. We do not retain

jurisdiction.

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