SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
6928-97T1
STATE OF NEW JERSEY,
Plaintiff-Respondent,
v.
ARMAND A. DeANGELIS
Defendant-Appellant.
Argued January 10, 2000 - Decided March 6,
2000
Before Judges Havey, Keefe and Collester.
On appeal from Superior Court of New Jersey,
Law Division, Middlesex County.
Michele A. Querques argued the cause for
appellant (Giordano, Halleran & Ciesla, and
Michael L. Addicott of the Florida bar,
admitted pro hac vice, attorneys;
Ms. Querques, Richard L. Friedman and
Mr. Addicott, on the brief).
Jordana Jakubovic, Deputy Attorney General,
argued the cause for respondent (John J.
Farmer, Jr., Attorney General, attorney;
Ms. Jakubovic, of counsel and on the brief).
The opinion of the court was delivered by
HAVEY, P.J.A.D.
The central issue raised by this appeal is whether a
defendant, convicted of a crime and subject to a restitution
order, is absolved from the terms of restitution by settling with
the victim in a civil action arising out of the same facts which
formed the basis of the criminal conviction. On defendant's
motion to vacate the restitution order, Judge Hoffman concluded
that the settlement agreement and release given to defendant by
the victim were not binding upon the court or the State,
reasoning that the State and judicial system have an interest in
restitution separate and apart from simply compensating the
victim. Accordingly, the judge held that "a private agreement to
extinguish restitution is contrary to the public policy of this
state and thus is void." We agree and accordingly affirm.
A jury found defendant guilty of four counts of
misapplication of entrusted property, N.J.S.A. 2C:21-15, and five
counts of unlawful offer, sale or purchase of securities,
N.J.S.A. 49:3-52 and N.J.S.A. 49:3-70(a). Defendant was
sentenced to an aggregate ten-year period of probation,
conditioned upon defendant serving two weeks in jail and
fulfilling the terms of a restitution order. Under the order
dated June 29, 1993, the State and defendant stipulated to the
total damages for each victim as follows:
Paul Zito $ 1.1 million
Barbara Gabriel $ 46,940.00
Steven Siperstein $ 22,000.00
Salvatore Mendola $ 43,000.00
Delores and Michael
Magnifico $ 19,000.00
The order requires defendant to make restitution in the
amount of $1.l million with "minimum payment" as follows:
(1) monthly payments by defendant in the amount of $2,000 to the
Middlesex County Probation Department for a period of ten years,
and a lump-sum payment of $15,000 on or before January 1, 1994;
(2) payment from two "custodia legis" funds subject to orders
entered in a related civil action into the restitution fund,
approximating $106,000; (3) defendant selling his Florida
residence within seven years (June 29, 2000), with all of the
proceeds of sale, not less than $135,000, paid into the
restitutionary account; (4) each of the five victims receiving
$10,000 once the restitutionary account totaled $50,000, with the
remainder of the money being paid to them on a pro rata basis;
and (5) payment by defendant "by the end of his probationary
period, any sums of money which were contemplated by this order
but were not made available, with the exception of the monthly
payments and the lump sum payment due in January, 1994." The
order further provided that defendant would be entitled to a
credit against his restitutionary obligation to the extent that
the individual victims receive payment from defendant "through
any other judgement or source emanating from [defendant]."
On August 2, 1993, victim Paul Zito and several relatives
(referred to collectively as "Zito"), obtained a civil judgment
against defendant in the amount of $1.6 million predicated on the
same misconduct which gave rise to defendant's criminal
convictions. Zito recorded this judgment in Florida, where
defendant resided and began proceedings to enforce it.
On April 12, 1995, Zito and defendant signed a forbearance
agreement under which Zito agreed "to forbear from exercising any
rights or remedies which it may have to collect on the
Indebtedness . . . ." In return, defendant agreed to: (1) pledge
to Zito all his stock in U.S. Coin Exchange, Inc. (a company
owned by defendant) to secure the indebtedness; (2) grant Zito a
lien on a 1991 Porsche Carrera, securing the sum of $12,500;
(3) deliver to Zito a mortgage on defendant's Florida property
(as delineated in the restitution order), securing a nonrecourse
note in the amount of $120,000; and (4) list the Florida property
for sale and, if sold, to pay the proceeds into the
restitutionary account. Defendant also agreed to turn over
certain personal property to Zito.
Additionally, defendant agreed to "[c]omply with all terms
and conditions of the Restitution Order . . . and perform all
actions required under the Restitution Order . . . ." The
agreement provided:
DeAngelis and U.S. Coin understand and agree
that . . . [nothing] in this Agreement is
intended to or should be construed to
diminish DeAngelis' obligations as presently
required under the Restitution Order to make
periodic restitution payments to the
Middlesex County Probation Department
("Periodic Restitution Payments") all of
which shall survive the execution of this
Agreement, the occurrence of the Latest
Termination Date, and the delivery of the
documents described above. Provided no
Actionable Event has occurred, the Zitos
agree to not seek or obtain a modification,
amendment, or alteration of the Restitution
Order the effect of which would increase the
amount of the Periodic Restitution Payments
beyond the amount and duration currently set
forth in the Restitution Order. The Zitos
agree that upon their execution of the
satisfactions of the Judgment and Stipulated
Final Judgment as provided in this Section,
the Zitos relinquish any further claim to
restitution under the Restitution Order other
than their pro rata share of the Periodic
Restitution Payments.
[Emphasis added.]
On or about May 17, 1996, defendant paid Zito $123,300
pursuant to the terms of the agreement, and turned over certain
personal property. On June 25, 1997, defendant and Zito signed a
settlement agreement in which Zito agreed to deliver to defendant
a satisfaction of judgment and release. Zito released defendant
from any and all . . . action and actions,
cause and causes of action, . . . claims,
. . . damages, debts, demands, . . .
executions, judgments, liability, . . . sums
of money, . . . whatsoever, regardless of
whether at law or in equity or under federal,
state, foreign or other law . . . arising out
of or in connection with, any one or more of
the following: . . . .
[Emphasis added.]
The "following" referred to specific pledge, security and
mortgage agreements, a promissory note, and the civil action
against DeAngelis.
On May 20, 1996, defendant made a lump-sum payment into the
restitutionary account of $195,340, apparently representing the
proceeds from the sale of his Florida house. As of that date,
defendant had paid a total of $395,093.51 into the account.
Defendant thereafter filed the instant motion in the Law
Division, Criminal Part, to declare his restitution obligation to
Zito satisfied. During the hearing on this motion, the parties
stipulated that the amount defendant had paid Zito in settlement
of the civil suit was $132,150.
Judge Hoffman denied defendant's motion, reasoning that the
forbearance and settlement agreements entered into by Zito and
defendant were not binding upon him in the criminal matter, where
Zito was not a party. The judge stated that the State and the
judicial system have interests in restitution separate from that
of merely compensating the victim. "[T]he State has an interest
in rehabilitating the offender, and the court has [an] interest
in seeing that its sentences are carried out." The judge
concluded, "a private agreement to extinguish restitution is
contrary to the public policy of this state and is thus void."
Nevertheless, defendant was credited with $132,150 toward his
restitutionary obligation to Zito, which represented "money
actually paid or the value of property actually transferred to
Dr. Zito or his representatives" pursuant to the settlement
agreement.
The Code of Criminal Justice recognizes that the civil law provides another avenue through which a victim of a crime may seek recompense from the defendant. N.J.S.A. 2C:44-2(f) provides:
The ordering of restitution pursuant to this section shall not operate as a bar to the seeking of civil recovery by the victim based on the incident underlying the criminal conviction. Restitution ordered under this section is to be in addition to any civil remedy which a victim may possess, but any amount due the victim under any civil remedy shall be reduced by the amount ordered under this section to the extent necessary to avoid double compensation for the same loss, and the initial restitution judgment shall remain in full force and effect.
[Emphasis added.]
Thus, in order to prevent double recovery by the victim, the statute provides for a credit against the amount due under the civil remedy for the amount paid under the restitution order. Here, defendant is not merely arguing that "any amount due [Zito] under [the settlement agreement should] be reduced by the amount ordered" for restitution. Indeed, Judge Hoffman granted defendant a credit against restitution in the amount defendant paid to Zito under the civil agreement. Rather, defendant seeks to extinguish his entire restitution obligation owed to Zito because of the much smaller amount ($132,150) he paid to Zito in satisfaction of the civil judgment. At oral argument before Judge Hoffman, defense counsel made his point most bluntly:
The effect that [release] agreement has, your Honor, is that if this Court doesn't uphold that agreement you're permitting Dr. Zito to breach it with impugnity and with the Court's blessing. . . .He [Zito] released DeAngelis from the restitutionary obligation.
Defendant's argument is based on a faulty premise. Contrary to defendant's assertion, the release Zito signed does not, by its terms, release defendant from his obligations under the restitution order. It only releases him from the specific debts arising out of or in connection with the listed matters, including the forbearance agreement and the Florida civil action brought by Zito. The release does not list the debts arising from the criminal conviction, as debts from which defendant is being released. A general release ordinarily covers all claims and demands at the time of the execution unless, by its terms, the parties restrict it to particular claims and demands. Herold v. Inman, 180 N.J. Super. 581, 586 (Law Div. 1981). This release was restricted in its terms. This point is driven home more forcibly when the release is read in conjunction with the forbearance agreement to which the release refers. In that agreement, Zito agreed to relinquish any claim to restitution other than his pro rata share of restitution payments under the restitution order. Furthermore, defendant acknowledges in the agreement that it does not "diminish [his] obligations as presently required under the Restitution Order." Clearly, the documents express no intention that the terms of the restitution order would be abrogated.
Even if we assume that the parties to the release intended to alter the terms of the restitution order, defendant's argument must be rejected. It is true, as defendant stresses, that "[t]he legislative focus with regard to restitution has been on compensation of victims." Cannel, New Jersey Criminal Code Annotated, comment 3 on N.J.S.A. 2C:44-2 (2000) (and cases cited therein). However, compensatory payments made pursuant to a restitution order "can have correctional worth, regardless of whether the offender is required only to disgorge the fruits of his offense or to compensate persons for the injuries and losses suffered as a result of his crime." In re Parole Application of Trantino, 89 N.J. 347, 358 (1982). Thus, requiring a defendant to pay restitution to a victim serves to rehabilitate the wrongdoer, as well as to compensate the victim. State v. Newman, 132 N.J. 159, 169 (1993). As the Court in State v. Harris, 70 N.J. 586 (1976), observed, unlike a fine or service of a jail term:
restitution has an understandable logic. It is directly related to the offense and the attitude of the offender. There is a reality involved: society does not sanction fraud or other forms of theft; it does not approve injury inflicted upon an innocent person. Society wants to make sure the offender realizes the enormity of his conduct, and it asks him to demonstrate this by making amends to the individual most affected by the defendant's depredations.
. . . .
Restitution may have a positive casework connotation. It offers the individual something within reason that he can do here and now, within the limits of his ability to demonstrate to himself that he is changing. A fine is punitive. A jail sentence is retributive. But restitution makes sense. It is every man's obligation to meet responsibilities of this sort in civil life.
[Id. at 593 (quoting D. Dressler, Practice and Theory of Probation and Parole 176-77 (1959)).]
The settlement agreement here ignores this rehabilitative purpose.
Further, N.J.S.A. 2C:44-2a(1) provides that the court may impose a fine if the "defendant has derived pecuniary gain from the offense . . . ." Although "pecuniary gain" is not mentioned in the statute as a factor to be considered in ordering restitution, see N.J.S.A. 2C:44-2b, we have observed that restitution prevents the defendant from realizing a financial windfall resulting from his criminal behavior. See State v. Pulasty, 259 N.J. Super. 274, 283-84 (App. Div. 1992) ("Like punishment, rehabilitation and deterrence, the other aims of criminal restitution, disgorgement of the ill-gotten gain is a far reaching goal quite distinct from the traditional compensatory rationale of the civil law."). Thus, the judicial system and the State necessarily have a role in fashioning a restitution order and assuring that a defendant complies with it. Consequently, the issue is whether the respective roles of the court and State are frustrated when a defendant, as here, makes a private settlement with a victim to extinguish a restitution obligation without endorsement by the court and State.
Out-of-state courts which have considered this question have uniformly held that a civil settlement or release does not absolve the defendant of criminal restitution. For example, in People v. Maxich, 971 P.2d 268, 269 (Colo. Ct. App. 1998), cert. denied, ___ P.2d ___ (Colo. 1999), defendant embezzled more than $285,000 from her former employer, who relinquished all claims against defendant stemming from the embezzlement in exchange for property with the net value of approximately $46,000. Ibid. After a restitution hearing, defendant was ordered, as a condition of probation, to pay $244,860.61 in restitution to her former employer. Ibid. On appeal, defendant argued that the criminal restitution order must be set aside because it conflicted with the release signed by the employer. Id. at 270. The court disagreed: "We conclude that a release from liability obtained in a civil settlement cannot limit a criminal court's authority to order restitution equivalent to actual pecuniary damages. A contrary conclusion would . . . frustrate the rehabilitative purposes of probation by permitting criminal defendants to avoid financial responsibility for their conduct." Ibid.
Similarly, in State v. Belfry, 416 N.W.2d 811, 812 (Minn. Ct. App. 1987), defendant was convicted of swindling eight individuals. A number of the victims settled with defendant and signed releases. The criminal court ordered defendant to pay restitution, crediting defendant with the amounts he had already paid the victims. Id. at 812-13. The Appellate Court rejected defendant's argument that the victims' releases barred the criminal court from ordering restitution. "The state's goals in imposing restitution are broader than merely compensating the victim, as the defendant's payment to the victim serves a rehabilitative purpose." Id. at 813. See also State v. Iniguez, 821 P.2d 194, 197-98 (Ariz. Ct. App. 1991) (court-ordered restitution to victim on defendant's aggravated assault conviction arising out of an accident while defendant was driving while intoxicated was not released by civil settlement of victim's personal injury action against defendant).
As in these out-of-state cases, the release between Zito and defendant cannot bind the judge who entered the restitution order or the State, neither having been a party to the settlement agreement. Further, the settlement agreement fulfills neither one of the goals of restitution within our criminal system, i.e., to compensate the victim and to rehabilitate the defendant. Under the settlement agreement, defendant agreed to pay Zito far less than what is due Zito under the $1.1 million restitution order. Even when the payment of $132,150 is considered in conjunction with the restitution payments defendant already paid into the restitution fund totaling $395,093.51, it falls far short of full compensation to Zito.
In addition, the goal of rehabilitation is not served by allowing a defendant to pay less than the amount of restitution the criminal court deemed appropriate. Because society does not sanction misapplication of entrusted funds in violation of our security laws, defendant's agreement with Zito frustrates society's expectation that defendant will realize the "enormity of his conduct" and that he will abide by the restitution order by making full payment to his victims. State v. Harris, supra, 70 N.J. at 593 (quoting D. Dressler, Practice and Theory of Probation and Parole, supra, at 176). Moreover, to permit defendant to enjoy a pecuniary gain from his criminal wrongdoing would conflict with an underlying purpose of restitution. State v. Pulasty, supra, 259 N.J. Super. at 283.
Defendant is critical of Judge Hoffman's bright-line rule that a private agreement to extinguish restitution is contrary to the public policy of this State. He warns that under this rule, "courts will no longer need to function as triers of fact, nor will they need to consider the relative equities between the parties to any proceeding brought to modify a court-ordered obligation to pay restitution." Defendant's argument is unpersuasive. For the reasons discussed above, an agreement between a defendant and a victim which abrogates court-ordered restitution is not binding on the State or the criminal court. Indeed, the bright-line rule actually effectuates the restitution order of the court by not allowing private parties to unilaterally alter it.
We therefore conclude that the settlement agreement and release signed by Zito did not operate to release defendant from his obligations under the restitution order.
The Eighth Amendment of the United States Constitution provides: "Excessive bail shall not be required, nor excessive fines imposed, nor cruel and unusual punishments inflicted." U.S. Const. amend. VIII.See footnote 11 A three-part test is utilized "in determining whether punishment is unconstitutionally cruel or unusual: 'First, does the punishment for the crime conform with contemporary standards of decency? Second, is the punishment grossly disproportionate to the offense? Third, does the punishment go beyond what is necessary to accomplish any legitimate penological objective?'" State v. Maldonado, 137 N.J. 536, 556-57 (1994) (quoting State v. Ramseur, 106 N.J. 123, 169 (1987)), cert. denied, 508 U.S. 947, 113 S.Ct. 2433, 124 L.Ed.2d 653 (1993)). Under this test, a sentence that merely requires a defendant to repay the victim money obtained through fraud cannot be said to be cruel and unusual. See United States v. Dean, 949 F. Supp. 782, 786 (D. Or. 1996) ("Where the amount of restitution is geared directly to the amount of the victim's loss . . . proportionality is already built into the order."), aff'd, United States v. Dubose, 146 F.3d 1141, 1145 (9th Cir.), cert. denied, ___ U.S. ___, 119 S.Ct. 430, 142 L.Ed.2d 350 (1998). It is difficult to envision how a restitution order which merely compensates the victims for their actual losses could constitute cruel and unusual punishment. United States v. Feldman, 853 F.2d 648, 663 (9th Cir. 1988), cert. denied, 489 U.S. 1030, 109 S.Ct. 1164, 103 L.Ed.2d 222 (1989).
The restitution order in this case does not violate the prohibition against excessive fines. A fine for Eighth Amendment purposes is "payment to a sovereign as punishment for some offense." Browning-Ferris Indus. of Vermont, Inc. v. Kelco Disposal, Inc., 492 U.S. 257, 265, 109 S.Ct. 2909, 2915, 106 L.Ed.2d 291, 232 (1989). Restitution is paid to the victim, not the State. Also, restitution is not meant to punish, but rather to rehabilitate the criminal. State v. Harris, supra, 70 N.J. at 592.
In sum, the restitution order is not unconstitutional.
The court's restitution order required defendant to sell his Florida home no later than seven (7) years from June 29, 1993, and pay the proceeds, but not less than $135,000, into the restitutionary account. On May 20, 1996, defendant paid $195,340 into the restitutionary account, which apparently represented the proceeds from the sale of the Florida house.
Defendant is apparently arguing that since he paid into the restitutionary account the money representing the equity in his house earlier than was called for by the restitution order, he is entitled to a credit for the future value of the proceeds from the sale of the home. Defendant cites no case law in support of this proposition and we could find none.
First, defendant did not pay over the home sale proceeds earlier than called for by the restitution order. The order required sale of the house no later than June 29, 2000. Thus, the payment into the restitutionary account of the house proceeds on May 20, 1996, was within the time period contemplated by the restitution order. It was not early, as defendant claims.
Second, defendant is not entitled to a credit for future value because he merely repaid Zito money that was defrauded from him a number of years ago. Actually, defendant has had the use of the defrauded money for many years. It is inconceivable that he should be credited future value under these circumstances.
Affirmed.
Footnote: 1 1The New Jersey Constitution contains a similar provision, N.J. Const. art. I, ¶ 12, but defendant has not invoked its protections.