Title: RSI Bank v. The Providence Mutual Fire Insurance Company

State: new-jersey

Issuer: New Jersey Supreme Court

Document:

SYLLABUS

(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of
the Clerk for the convenience of the reader. It has been neither reviewed nor approved by the
Court. In the interest of brevity, portions of any opinion may not have been summarized.)

    RSI Bank v. The Providence Mutual Fire Insurance Company (A-68-16) (079116)

Argued January 17, 2018 -- Decided August 7, 2018

PATTERSON, J., writing for the Court.

       This appeal arises from the trial court’s reliance on an indemnification obligation,
designated as a condition of pretrial intervention (PTI), as evidence in a civil dispute.

        Third-party defendant Dr. George Likakis was charged with aggravated arson and
insurance fraud after a fire destroyed a building he owned (the Property). Plaintiff RSI Bank
held a first-priority mortgage on the Property, and defendant/third-party plaintiff The
Providence Mutual Fire Insurance Company (Providence) issued a commercial liability
policy that covered the Property. Following the fire, Likakis and RSI Bank submitted
insurance claims. Providence denied both sets of claims.

       Providence’s denial of coverage prompted the filing of two actions in the Law
Division. The first was filed by Likakis against Providence. The second action gave rise to
this appeal: RSI Bank asserted against Providence claims for breach of contract, fraudulent
misrepresentation, violations of the Consumer Fraud Act, and bad faith. Providence filed a
third-party complaint against Likakis, alleging claims for indemnification. Both civil
lawsuits were pending when criminal proceedings commenced against Likakis.

        A grand jury indicted Likakis, who applied for admission into the PTI program. The
PTI director recommended his admission and told the PTI court that “the victim,
[Providence], does not object to the defendant’s enrollment into PTI as long as” Likakis
satisfied three conditions: restitution in the amount of $11,321.89, representing the insurance
proceeds already paid to RSI Bank; Likakis’s commitment to “protect/compensate
[Providence] from any and all claims that may be brought against [Providence] by RSI Bank
as the result of the . . . fire”; and the dismissal with prejudice of Likakis’s lawsuit against
Providence. The prosecutor consented to those terms.

        The PTI court approved Likakis’s admission into PTI and entered an order postponing
further proceedings in Likakis’s criminal matter for a period of one year. With Likakis’s
consent -- but no assessment of his ability to pay -- the court also imposed the three
conditions that Providence had requested. During his PTI term, Likakis paid Providence the
specific restitution amount and dismissed with prejudice his lawsuit. Likakis did not make
any payment related to the separate indemnification provision. With the prosecutor’s
consent, the PTI court terminated Likakis’s PTI supervision and dismissed his indictment.
                                                1
       RSI Bank and Providence settled their coverage dispute. Providence agreed to pay
RSI Bank $353,536.90 in settlement of all of the bank’s claims based on the insurance policy
and moved for summary judgment against Likakis based on the provision of the PTI
agreement in which Likakis agreed to indemnify and hold harmless Providence. The motion
judge granted in part and denied in part Providence’s summary judgment motion. He found
genuine issues of material fact as to whether the parties to the PTI agreement intended that
agreement to survive the PTI supervisory period, and the amount of any damages for which
Likakis would be liable. Those undecided issues were litigated in a non-jury trial.
Following the trial, the court held that the indemnification provision of the PTI agreement
was enforceable against Likakis and ordered Likakis to pay Providence $232,568.71,
representing the portion of the settlement funds that Providence attributed to fire damage,
less $11,321.89, the amount that Likakis had paid during his PTI supervisory period. Likakis
appealed, and an Appellate Division panel affirmed the trial court’s judgment, rejecting
Likakis’s argument that the agreement could be enforced only during the one-year period of
PTI supervision. The Court granted Likakis’s petition for certification. 
230 N.J. 414 (2017).

HELD: A PTI court may include a restitution condition in a PTI agreement only if it can
quantify the financial obligation and assess the participant’s current and prospective ability to
meet that obligation. An open-ended agreement to indemnify the victim of the participant’s
alleged offense for unspecified future losses is not an appropriate condition of PTI. Moreover,
a restitution condition of PTI is inadmissible as evidence in a subsequent civil proceeding
against the PTI participant. The indemnification provision of the PTI agreement at issue should
have played no role in this civil litigation.

1. PTI is an alternative to the traditional process of prosecuting criminal defendants. It exists to
provide prosecutors an alternate method to dispose of charges levied against qualified
applicants consistent with the interest of the applicant and the overall interests of society and
the criminal justice system. The PTI statute, 
N.J.S.A. 2C:43-12 to -22, prescribes seventeen
criteria for admission to PTI. See id. § 12(e). When Likakis applied for PTI, Rule 3:28 and its
Guidelines supplemented the statutory criteria. The PTI statute and court rule recognize the
importance of a victim’s concerns in PTI determinations, as does case law. (pp. 14-19)

2. Restitution serves to rehabilitate the wrongdoer and to compensate the victim of the
wrongdoer’s conduct. An order of restitution is designed to strip a defendant of pecuniary gain
from the crime where that gain is directly related to the crime itself and the defendant has the
ability (though not necessarily the immediate means) to pay. (pp. 19-20)

3. In criminal sentencing, a court imposes restitution in addition to a term of imprisonment or
probation if “(1) [t]he victim . . . suffered a loss; and (2) [t]he defendant is able to pay or, given
a fair opportunity, will be able to pay restitution.” 
N.J.S.A. 2C:44-2(b). The statutory
constraints ensure that the defendant will be capable of paying the restitution amount, thus
achieving the rehabilitative goal. When a sentencing court has not conducted a meaningful
evaluation of a defendant’s ability to pay, appellate courts routinely vacate restitution orders
and remand for reconsideration. Thus, in the sentencing context, a restitution order will not

                                                 2
survive appellate review if the sentencing court has not specified the restitution amount and
determined whether the defendant will be capable of paying that amount. (pp. 20-22)

4. For purposes of PTI, Rule 3:28 incorporated the core principles that govern restitution
awards in criminal sentencing. First, in PTI proceedings as in sentencing, restitution exists to
serve a rehabilitative goal and to compensate the victim. Second, a PTI court was authorized to
impose a restitution obligation only after a careful assessment in a hearing of the defendant’s
ability to pay. PTI Guideline 3(k) mandated that any restitution requirement “be judicially
determined at the time of enrollment.” Thus, before entering a restitution order, the court was
required to quantify the obligation to be imposed and determine whether the defendant would
be in a position to meet that obligation. Third, the court rule governing Likakis’s admission
into PTI maintained a clear distinction between a PTI restitution order and any civil claim that
may arise from the PTI participant’s offenses against the victim. Evidence of a restitution
condition imposed in PTI was “not admissible against [the participant] in any subsequent civil
or criminal proceeding.” Pressler & Verniero, Current N.J. Court Rules, Guideline 3(k) to R.
3:28, at 1292 (2018). Consistent with its rehabilitative purpose, a PTI agreement is not
intended to serve as the basis for civil liability. (pp. 23-25)

5. Here, the PTI court appropriately took into account Providence’s view. The PTI court did
not, however, take the steps necessary to properly impose the indemnification requirement as a
condition of PTI. The record reflects no ability-to-pay hearing to assess Likakis’s current and
future resources, and the PTI court did not impose a specific restitution obligation or payment
schedule for any restitution amount beyond the $11,321.89 that Likakis was required to pay.
The indemnification provision in Likakis’s PTI agreement did not conform to the requirements
of a valid restitution condition of PTI. (pp. 25-27)

6. Based on the record, there is no indication that any party or the PTI court addressed the
indemnification provision at the close of Likakis’s one-year PTI supervisory period. Instead,
the PTI court terminated Likakis’s PTI period and dismissed his indictment with no order
regarding any outstanding restitution obligation. With his PTI proceedings thus concluded,
Likakis had no obligation to make additional payments under the restitution provision of the
PTI court’s order. (pp. 27-28)

7. Even if the PTI court had imposed an appropriate restitution condition on Likakis, that
condition could not have been properly admitted in this civil matter. The invalid
indemnification provision of the PTI agreement was clearly inadmissible in this case, either as
the basis for the motion court’s grant of partial summary judgment or as the dispositive
evidence in the non-jury trial. Accordingly, the trial court improperly enforced the
indemnification provision and entered judgment in Providence’s favor. (pp. 28-29)

       REVERSED.

CHIEF JUSTICE RABNER and JUSTICES LaVECCHIA, ALBIN, FERNANDEZ-
VINA, SOLOMON, and TIMPONE join in JUSTICE PATTERSON’s opinion.

                                              3
                                      SUPREME COURT OF NEW JERSEY
                                        A-
68 September Term 2016
                                                 079116
RSI BANK, a New Jersey
Banking Corporation,

    Plaintiff,

        v.

THE PROVIDENCE MUTUAL FIRE
INSURANCE COMPANY,

    Defendant Third-Party
    Plaintiff-Respondent,

        v.

DR. GEORGE LIKAKIS,

    Third-Party Defendant-
    Appellant.

         Argued January 17, 2018 – Decided August 7, 2018

         On certification to the Superior Court,
         Appellate Division.

         Allen N. Papp argued the cause for appellant
         (Adams, Cassese & Papp, attorneys; Allen N.
         Papp, on the briefs).

         Marc L. Dembling argued the cause for
         respondent (Methfessel & Werbel, attorneys;
         Marc L. Dembling, of counsel and on the
         brief, and Danielle N. Singer, on the
         brief).

    JUSTICE PATTERSON delivered the opinion of the Court.

    When a criminal defendant is admitted into pretrial

intervention (PTI), the court may impose on that defendant the

obligation to pay restitution to the victim of his or her

                                1
alleged offense as a condition of PTI.    In accordance with the

PTI program’s rehabilitative goal, the PTI court holds a hearing

to determine the participant’s ability to pay and orders the

participant to pay a specific amount.    Evidence of a restitution

obligation imposed as a condition of PTI is inadmissible in any

subsequent civil or criminal proceeding against the defendant.

    This appeal arises from the trial court’s reliance on an

indemnification obligation, designated by a PTI court as a

condition of PTI, as dispositive evidence in a civil dispute.

Third-party defendant Dr. George Likakis was charged with

aggravated arson and insurance fraud after a fire destroyed a

residential building that he owned.     When Likakis was admitted

into PTI, the PTI court required him to pay a specific amount in

restitution to his insurer, defendant/third-party plaintiff The

Providence Mutual Fire Insurance Company (Providence), based on

Providence’s prior insurance payments to plaintiff RSI Bank,

holder of a mortgage on the property.    The PTI court also

ordered Likakis to indemnify Providence and hold it harmless for

its undetermined future liability to RSI Bank arising from the

fire.   The PTI court thus imposed on Likakis an unquantified

restitution requirement, without first determining that Likakis

could meet such an obligation.

    During his one-year period of PTI supervision, Likakis paid

Providence the specified restitution amount but did not

                                 2
indemnify Providence or hold it harmless for any additional

liability to RSI Bank.   With the prosecutor’s consent and with

no discussion of the indemnification provision, the PTI court

terminated Likakis’s PTI supervision and dismissed his

indictment.

    In this insurance coverage litigation, Providence relied on

the indemnification provision of Likakis’s PTI agreement in its

third-party complaint against Likakis.   It settled its claims

with RSI Bank for $353,536.90, and sought to recover $243,890.60

from Likakis on the basis of the indemnification provision.      The

trial court enforced the provision and entered judgment in

Providence’s favor against Likakis.   An Appellate Division panel

affirmed that determination.

    In appropriate settings, a PTI court’s imposition of

restitution as a condition of PTI furthers the participant’s

rehabilitation as it compensates the victim of the alleged

offense.   A PTI court, however, may include a restitution

condition in a PTI agreement only if it can quantify the

financial obligation and assess the participant’s current and

prospective ability to meet that obligation.   An open-ended

agreement to indemnify the victim of the participant’s alleged

offense for unspecified future losses is not an appropriate

condition of PTI.   Moreover, a restitution condition of PTI is

inadmissible as evidence in a subsequent civil proceeding

                                 3
against the PTI participant.     The indemnification provision of

Likakis’s PTI agreement should have played no role in this civil

litigation.

    Accordingly, we hold that the trial court erred when it

entered judgment in favor of Providence.     We reverse the

Appellate Division’s judgment and remand the matter to the trial

court for further proceedings.

                                  I.

    We derive our summary of the facts from the record

presented to the trial court in this matter.

    Pursuant to a Mortgage and Security Agreement dated October

14, 2003, RSI Bank held a first-priority mortgage on several

properties as collateral for a $700,000 loan to Perth Amboy

Professional Center, LLC, a limited liability corporation owned

by Likakis.   One of the properties subject to the mortgage was a

residential property located at 519 New Brunswick Avenue in

Perth Amboy (the Property).

    On June 21, 2011, Providence issued a commercial liability

policy to Likakis and Perth Amboy Professional Center, LLC,

which covered the Property.    The policy, in effect from August

20, 2011 to August 20, 2012, named RSI Bank as first

mortgagee/loss payee.   The policy obligated Providence to “pay

for covered loss of or damage to buildings or structures to each

mortgageholder shown in the Declarations in their order of

                                  4
precedence, as interests may appear.”    It included the following

provision:

         If we pay the mortgageholder for any loss or
         damage and deny payment to you because of your
         acts or because you have failed to comply with
         the terms of the Coverage Part:

         (1)    The mortgageholder’s rights under the
                mortgage will be transferred to us to the
                extent of the amount we pay; and

         (2)    The mortgageholder’s right to recover the
                full amount of the mortgageholder’s claim
                will not be impaired.

         At   our   option,   we  may   pay  to  the
         mortgageholder the whole principal on the
         mortgage plus any accrued interest. In this
         event, your mortgage and note will be
         transferred to us and you will pay your
         remaining mortgage debt to us.

    On August 28, 2011, Hurricane Irene caused a flood that

substantially damaged the roof and basement of the residential

building on the Property.    On January 6, 2012, the building was

virtually destroyed in a fire.    It was eventually condemned and

demolished.    Witnesses told investigators that they had seen

Likakis, wearing latex gloves and carrying a heavy package, on

the Property the day before the fire.    Investigators attributed

the fire to arson.

    Following the fire, Likakis submitted insurance claims to

Providence based on flood and fire damage to the Property.   RSI

Bank, in its capacity as mortgage holder and loss payee, also

submitted claims to Providence for flood and fire damage to the

                                  5
Property.   Following a “thorough investigation,” Providence

denied both sets of claims.

                                 II.

                                  A.

    Providence’s denial of coverage prompted the filing of two

actions in the Law Division.    The first was filed by Likakis’s

dental practice, Dr. George Likakis, DDS, and Perth Amboy

Professional Center, LLC.     In that action, the plaintiffs

alleged that Providence had denied coverage in bad faith.

    The second action was the lawsuit that gave rise to this

appeal. In that case, RSI Bank asserted against Providence

claims for breach of contract, fraudulent misrepresentation,

violations of the Consumer Fraud Act, 
N.J.S.A. 56:8-1 to -210,

and bad faith.   Providence filed a third-party complaint against

Likakis, alleging claims based on both common law and

contractual indemnification.

    Both civil lawsuits -- Likakis’s action against Providence,

and RSI Bank’s action against Providence in which Likakis was

named as a third-party defendant -- were pending when the

Middlesex County Prosecutor’s Office commenced criminal

proceedings against Likakis.

                                  B.

    On May 23, 2013, a Middlesex County grand jury indicted

Likakis on one count of second-degree aggravated arson, N.J.S.A.

                                  6
2C:17-1(a), one count of third-degree insurance fraud based on

false statements of material fact, 
N.J.S.A. 2C:21-4.6(a)(1), and

one count of third-degree insurance fraud based on omission of

material facts, 
N.J.S.A. 2C:21-4.6(a)(1).

    Likakis applied for admission into the Middlesex Vicinage’s

PTI program.   On April 30, 2014, the PTI Director recommended

that Likakis be admitted into PTI.   In the PTI Recommendation,

the Director noted the fire investigator’s conclusion that the

fire resulted from arson and stated that witnesses implicated

Likakis in that arson.   The PTI Director stated, however, that

the incident represented the only charge for an indictable

offense in Likakis’s history, and deemed the fire to be an

“isolated event.”

    The PTI Director concluded that Likakis would benefit from

supervised treatment.    She told the PTI court that although

Likakis was indicted for a second-degree offense, “the victim,

[Providence], does not object to the defendant’s enrollment into

PTI as long as” Likakis satisfied three conditions:    restitution

in the amount of $11,321.89, representing the insurance proceeds

already paid to RSI Bank; Likakis’s commitment to

“protect/compensate [Providence] from any and all claims that

may be brought against [Providence] by RSI Bank as the result of

the . . . fire”; and the dismissal with prejudice of Likakis’s

                                 7
lawsuit against Providence.     The prosecutor consented to those

terms.

     The PTI court approved Likakis’s admission into PTI.      On

May 14, 2014, the court entered an order postponing further

proceedings in Likakis’s criminal matter for a period of one

year, and setting forth the standard and special conditions of

his PTI supervision.1    With Likakis’s consent -- but no

assessment of his ability to pay -- the court also imposed the

three conditions of PTI that Providence had requested.       First,

Likakis was required to pay Providence $11,321.89 in monthly

installments of $1000 per month.       Second, Likakis was ordered to

“[p]rotect/compensate, indemnify and hold harmless [Providence]

from any and all claims that may be brought against [Providence]

by RSI Bank.”2    Third, Likakis was required to dismiss his civil

action against Providence with prejudice.

     At a hearing before the PTI judge, at which Providence was

not represented, the prosecutor confirmed Likakis’s agreement to

those terms.     The prosecutor stated that the terms “indemnify,

1  The standard conditions of PTI supervision imposed included
compliance with the law; contacts with the probation officer as
directed; no unauthorized move out of state; maintenance of
employment; and cooperation with any required testing,
treatment, and counseling.

2  The phrase “indemnify and hold harmless” was a handwritten
addition to the typed agreement, and was initialed by the
prosecutor, who confirmed on the record that he wrote that
language into the agreement.
                                   8
hold harmless, compensate” meant that Likakis would not “pursue

now or ever any claim against [Providence] regarding the loss

and the payment that [Likakis was] going to make to [Providence]

for the $11,000.”     Likakis confirmed that he understood that

agreement as the prosecutor characterized it.     The prosecutor

reminded Likakis that his PTI conditions were “independent” of

the one-year period of supervision, and told Likakis that his

PTI would not be terminated after a year if he failed to make

the required payments.

    The PTI court subsequently explained to Likakis the

consequences of the “monetary obligation” imposed on him as a

condition of his admission into PTI.     The court stated that

“[i]t’s important that that indemnification be paid within the

12-month period.     Otherwise, there’s a possibility that P.T.I.

may be extended until you’ve handled all your financial

obligations.”

    During his one-year PTI supervisory term, Likakis paid

Providence the specific restitution amount set forth in his PTI

agreement.    He also dismissed with prejudice his lawsuit against

Providence.     Likakis did not make any payment to Providence

related to the separate indemnification provision.

    By order dated May 20, 2015, with the prosecutor’s consent,

the PTI court terminated Likakis’s PTI supervision and dismissed

his indictment.     The record reveals no discussion of the

                                   9
indemnification provision of Likakis’s PTI agreement in the

final stage of his PTI supervision.

                                C.

    The coverage litigation that gave rise to this appeal was

pending during Likakis’s year-long PTI supervision.    When

Likakis completed PTI on May 20, 2015, the matter remained

unresolved.

    On July 31, 2015, RSI Bank and Providence settled their

coverage dispute.   Providence agreed to pay RSI Bank $353,536.90

in settlement of all of the bank’s claims based on the insurance

policy that insured Likakis’s property, including claims arising

from flood and fire damage to that property.     As part of that

settlement, RSI Bank assigned to Providence a second-lien

position in a mortgage issued by RSI Bank to Likakis, his wife,

and his dental practice, as well as the note that accompanied

that mortgage.   In the assignment, RSI represented that the

balance due on the mortgage was $353,536.90.

    Providence moved for summary judgment against Likakis based

on the provision of the PTI agreement in which Likakis agreed to

indemnify and hold harmless Providence.    It asserted that it was

a third-party beneficiary of that agreement, and that Likakis

was liable to it in the amount of its settlement with RSI Bank.

    The motion judge granted in part and denied in part

Providence’s summary judgment motion.     The judge held that

                                10
Providence was a third-party beneficiary of the PTI agreement’s

indemnification provision.    He found, however, genuine issues of

material fact as to whether the parties to the PTI agreement

intended that agreement to survive the PTI supervisory period,

and the amount of any damages for which Likakis would be liable.

     Those undecided issues were litigated in a non-jury trial.

The evidence consisted entirely of documents.    No witness

testified for either party.

     Following the trial, the court entered judgment in favor of

Providence on its contractual indemnification claim.3   The court

held that the indemnification provision of the PTI agreement was

enforceable against Likakis notwithstanding the conclusion of

his PTI supervision.   The trial court cited the plain language

of the agreement and Likakis’s acknowledgment when he was

admitted into PTI that he was bound by the agreement.    The trial

court concluded that the PTI agreement imposed a “restitution or

reimbursement” obligation on Likakis, and that the agreement did

not expire after the one-year period of PTI supervision.      It

3  Addressing Providence’s claims for common-law indemnification,
the trial court opined that Likakis’s only duty to Providence
derived from the insurance policy, and found that Providence had
“failed to meet its burden to prove by a preponderance of the
evidence that the arson was an act of [Likakis] entitling it to
recovery.” In the accompanying order, however, the trial court
did not dismiss, or otherwise address, the counts of the third-
party complaint that asserted a common-law indemnification
claim.
                                 11
ordered Likakis to pay Providence $232,568.71, representing the

portion of the settlement funds that Providence attributed to

fire damage, less $11,321.89, the amount that Likakis had paid

Providence during his PTI supervisory period.

    Likakis appealed, and an Appellate Division panel affirmed

the trial court’s judgment.   The panel rejected Likakis’s

arguments that the trial court lacked jurisdiction to enforce a

term of Likakis’s PTI agreement and that the agreement could be

enforced only during the one-year period of PTI supervision.

The panel held that the language of the indemnification

provision was clear and that Providence, as a third-party

beneficiary of that agreement, was entitled to enforce the

indemnification provision in the parties’ civil litigation.

    We granted Likakis’s petition for certification.      
230 N.J.
 414 (2017).

                               III.

    Likakis argues that no court other than the PTI court had

jurisdiction to enforce the PTI agreement.   He asserts that the

PTI agreement is analogous to a criminal sentence, and that it

was negotiated for the benefit of the State, not to compensate

Providence.   Likakis contends that even if a civil court had the

authority to enforce a provision of his PTI agreement, any such

authority expired at the conclusion of his PTI supervision.

                                12
    Providence argues that the trial court had jurisdiction to

enforce the PTI agreement pursuant to Article VI, Section 3,

Paragraph 2 of the New Jersey Constitution, which confers

original jurisdiction on the Superior Court “in all causes.”

Providence asserts that the trial court properly found that it

is the third-party beneficiary of Likakis’s PTI agreement with

the State, and that the State refrained from prosecuting Likakis

in consideration for Likakis’s agreement to pay restitution to

Providence.    Providence contends that Likakis’s indemnification

obligation survived the expiration of the one-year period of PTI

supervision.

                                 IV.

                                 A.

    We review two determinations:      the motion judge’s grant of

partial summary judgment and the trial court’s determination

following a non-jury trial.

    Appellate review of a summary judgment decision is premised

on the same standard that governs the motion judge’s

determination.   Bhagat v. Bhagat, 
217 N.J. 22, 38 (2014).

Pursuant to that standard, a court grants summary judgment “if

the pleadings, depositions, answers to interrogatories and

admissions on file, together with the affidavits, if any, show

that there is no genuine issue as to any material fact

challenged and that the moving party is entitled to a judgment

                                 13
or order as a matter of law.”   R. 4:46-2(c); see also Brill v.

Guardian Life Ins. Co. of Am., 
142 N.J. 520, 540 (1995).     “When

no issue of fact exists, and only a question of law remains,

this Court affords no special deference to the legal

determinations of the trial court.”    Templo Fuente De Vida Corp.

v. Nat’l Union Fire Ins. Co., 
224 N.J. 189, 199 (2016); see

Freedom from Religion Found. v. Morris Cty. Bd. of Chosen

Freeholders, 
232 N.J. 543, 553 (2018).

    We uphold the trial court’s factual findings in a non-jury

trial “if they are based on credible evidence in the record.”

Motorworld, Inc. v. Benkendorf, 
228 N.J. 311, 329 (2017).     “To

the extent that the trial court interprets the law and the legal

consequences that flow from established facts, we review its

conclusions de novo.”   Ibid.; accord Manalapan Realty, L.P. v.

Twp. Comm. of Manalapan, 
140 N.J. 366, 378 (1995).

                                B.

    PTI “is an alternative procedure to the traditional process

of prosecuting criminal defendants.”     State v. Leonardis, 
71 N.J. 85, 89 (1976).   It exists “to provide prosecutors an

alternate method to dispose of charges levied against qualified

applicants consistent with the interest of the applicant and the

overall interests of society and the criminal justice system.”

State v. Brooks, 
175 N.J. 215, 223 (2002).    PTI is “specifically

designed to avoid a trial and the stigma accompanying a verdict

                                14
of guilt to any criminal offense.”    State v. Bell, 
217 N.J. 336,

347 (2014).

     When it adopted the PTI statute, 
N.J.S.A. 2C:43-12 to -22,

the Legislature declared it to be the State’s public policy “to

provide uniform opportunities to avoid prosecution for a

criminal offense when early rehabilitation services or

supervision may deter future criminal behavior, or when an

applicant might be harmed by imposition of criminal sanctions.”

Bell, 
217 N.J. at 347 (citing 
N.J.S.A. 2C:43-12(a)(1), (2)).

Although “the goal of expeditious disposition is certainly

important and central to the PTI concept, it is at the same time

subordinate to the rehabilitative function of PTI.”   Id. at 346

(quoting Leonardis, 
71 N.J. at 98).

     In accord with the statutory framework, Rule 3:28 and its

Guidelines prescribed the procedure by which a designated PTI

judge determines whether a criminal defendant will be admitted

to this diversionary program.4   Under the version of Rule 3:28 in

4 Rule 3:28, the PTI Guidelines, and the Official Comments that
govern this appeal were repealed and replaced, effective July 1,
2018. The new rules, R. 3:28-1 to -10, “are designed to realign
the PTI program to its original purpose to divert from
prosecution first time offenders who would benefit from its
rehabilitative components.” Notice to the Bar: Proposed New
Court Rules 3:28-1 through 3:28-10 (Pretrial Intervention) 6
(Aug. 16, 2017). In addition to amending the admission process
for certain offenders, the new rules incorporate certain
provisions from Rule 3:28 and the PTI Guidelines. Ibid. We
rely on the version of Rule 3:28 and the accompanying Guidelines
and Comments that governed when Likakis was admitted to PTI.
                                 15
effect when Likakis applied for PTI, a PTI application was

required to be filed “at the earliest possible opportunity,

including before indictment, but in any event no later than

twenty-eight days after indictment.”        R. 3:28(h).   Within

twenty-five days of the submission of the application, the

criminal division manager would evaluate that application and

make a recommendation.     Ibid.   The prosecutor would then review

the application and advise the defendant whether the application

was accepted or rejected.     Ibid.     The defendant was permitted to

appeal the rejection of his or her PTI application to the

Presiding Judge of the Criminal Division or the judge overseeing

the matter.    Ibid.

    So that PTI will advance the Legislature’s primary goal of

rehabilitation, an applicant’s admission into PTI depends on his

or her “amenability to correction, responsiveness to

rehabilitation and the nature of the offense.”        
N.J.S.A. 2C:43-

12(b)(1).     The statute prescribes seventeen criteria for

admission to PTI.      See 
N.J.S.A. 2C:43-12(e).    When Likakis

applied for PTI, Rule 3:28 and its Guidelines supplemented the

statutory criteria.     See Pressler & Verniero, Current N.J. Court

Rules, Guideline 3 to R. 3:28, at 1292-93 (2018).

    The statute, Rule 3:28, and the Guidelines defined the

parameters of a PTI participant’s supervisory treatment.           Such

treatment was “for such period, as determined by the designated

                                   16
judge or the assignment judge, not to exceed three years.”

N.J.S.A. 2C:43-13(c).    When a defendant was accepted into PTI,

the designated judge was authorized, “on the recommendation of

the criminal division manager and with the consent of the

prosecutor and the defendant,” to postpone all further

proceedings against that defendant on his or her charges for the

specified period.     R. 3:28(b).

    “The terms and duration of the supervisory treatment shall

be set forth in writing, signed by the prosecutor[,] and agreed

to and signed by the participant” and his or her counsel if the

participant is represented.    
N.J.S.A. 2C:43-13(a).    A

participant’s violation of his or her PTI conditions may

“warrant[] the participant’s dismissal from the supervisory

treatment program.”     
N.J.S.A. 2C:43-13(e).   In that event, “the

charges against the participant may be reactivated,” or “the

conditions of continued participation in that or another

supervisory treatment program” may be modified.      Ibid.

    At the conclusion of the prescribed period of supervisory

treatment, on the recommendation of the criminal division

manager and with the consent of the prosecutor and the

defendant, the PTI judge was authorized to dismiss the

complaint, indictment, or accusation against the defendant; or

to further postpone all proceedings if the maximum period of

three years has not expired.    R. 3:28(c)(1), (2); see also

                                    
17 N.J.S.A. 2C:43-13(d) (providing for dismissal with prejudice,

with prosecutor’s consent, of PTI participant’s complaint,

indictment, or accusation upon completion of supervisory

treatment).     Alternatively, the PTI judge was permitted to

“order the prosecution of the defendant to proceed in the

ordinary course” on the written recommendation of the criminal

division manager or the prosecutor, or on the court’s own

motion.   R. 3:28(c)(3).

     The victim of a PTI applicant’s alleged offenses is not a

party to a PTI proceeding.     See generally 
N.J.S.A. 2C:43-12,

-13; R. 3:28.    The PTI statute and court rule, however,

recognize the importance of a victim’s concerns in PTI

determinations.    Among other criteria, the statute requires

prosecutors to consider “[t]he desire of the complainant or

victim to forego prosecution,” 
N.J.S.A. 2C:43-12(e)(4), and

“[t]he needs and interests of the victim and society,” 
N.J.S.A.

2C:43-12(e)(7).5

     Case law also acknowledges the importance of the victim’s

views.    See, e.g., State v. Nicholson, 
451 N.J. Super. 534, 554

5  The importance of the victim’s views was underscored in a
statutory amendment and the amendment to Rule 3:28 that followed
the PTI proceeding at issue here. In nearly identical language,

N.J.S.A. 2C:43-12(e) and Rule 3:28-4(c) require prosecutors and
program directors to “give due consideration to the victim’s
position” on whether the defendant should be admitted into PTI.
See L. 2015, c. 98; R. 3:28-4(c).
                                  18
(App. Div. 2017) (noting that victim’s opposition to PTI is

appropriate factor to be considered); State v. Imbriani, 
291 N.J. Super. 171, 180-81 (App. Div. 1996) (same); cf. State v.

Ridgway, 
208 N.J. Super. 118, 127 (Law Div. 1985) (finding that

victim’s family’s opposition to defendant’s admission “is a

factor which must be considered” but is not conclusive because

likely not based on recognized PTI considerations).

    The victim of a PTI applicant’s alleged offenses is thus

afforded an opportunity to state his or her view on the

application.   Although it is not dispositive, the victim’s view

must be considered when a defendant’s application for PTI is

determined, and conditions of PTI are imposed.

                                C.

                                1.

    “[R]estitution serves to rehabilitate the wrongdoer and to

compensate the victim of the wrongdoer’s conduct.”    State v.

Newman, 
132 N.J. 159, 169 (1993).    It “extends beyond the

concept of simple justice to one aggrieved and entitled to

restitution of that unlawfully taken or reparation for loss

unlawfully inflicted.”   State v. Harris, 
70 N.J. 586, 592

(1976).   “[C]ompensatory 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

                                19
a result of his crime.’”   State v. DeAngelis, 
329 N.J. Super.
 178, 186 (App. Div. 2000) (quoting In re Parole Application of

Trantino, 
89 N.J. 347, 358 (1982)).

    An order of restitution is designed “to strip a defendant

of pecuniary gain from the crime where that gain is directly

related to the crime itself and the defendant has the ability

(though not necessarily the immediate means) to pay.”    State v.

Pulasty, 
259 N.J. Super. 274, 283 (App. Div. 1992).   As such, a

restitution order is distinct “from a civil judgment, which is

intended to make the victim whole.”   Felicioni v. AOC, 
404 N.J.

Super. 382, 394 (App. Div. 2008).

    Under the Rule that governed Likakis’s admission into PTI,

a court was authorized to include a restitution requirement as

part of a PTI participant’s service plan.   Pressler & Verniero,

Guideline 3(k) to R. 3:28, at 1292.   When addressing restitution

under that Rule, we consider the law that governs restitution

when it is imposed as a condition of probation or otherwise made

part of a convicted defendant’s criminal sentence.    See Pressler

& Verniero, Official Comment to Guideline 3 to R. 3:28, at 1294

(incorporating procedures for setting restitution in sentencing

prescribed in State in Interest of D.G.W., 
70 N.J. 488, 503-06

(1976), and Harris, 
70 N.J. at 597-99, into PTI restitution

determinations); see also State v. Jamiolkoski, 
272 N.J. Super.
 326, 329 (App. Div. 1994) (discerning “no reason why standards

                                20
governing the resolution of issues where restitution is a

condition of probation should not apply in the same manner when

restitution is a condition of defendant’s participation in

[PTI]”).

    In criminal sentencing, a court imposes restitution in

addition to a term of imprisonment or probation if “(1) [t]he

victim, or in the case of a homicide, the nearest relative of

the victim, suffered a loss; and (2) [t]he defendant is able to

pay or, given a fair opportunity, will be able to pay

restitution.”   
N.J.S.A. 2C:44-2(b).    The statutory constraints

ensure that the defendant will be capable of paying the

restitution amount, thus achieving the rehabilitative goal.

Newman, 
132 N.J. at 172-73; Trantino, 
89 N.J. at 360.

    A court imposing restitution must “conduct at least a

summary hearing” to determine the ability to pay.    State v.

Paladino, 
203 N.J. Super. 537, 547 (App. Div. 1985); see also

Harris, 
70 N.J. at 598-99; D.G.W., 
70 N.J. at 501-03.     In

setting the restitution amount and the schedule for payment,

“the court shall take into account all financial resources of

the defendant, including the defendant’s likely future earnings,

and shall set the amount of restitution so as to provide the

victim with the fullest compensation for loss that is consistent

with the defendant’s ability to pay.”    
N.J.S.A. 2C:44-2(c)(2).

                                21
    When a sentencing court has not conducted a meaningful

evaluation of a defendant’s ability to pay, appellate courts

routinely vacate restitution orders and remand for

reconsideration.   See, e.g., State v. Pessolano, 
343 N.J. Super.
 464, 479 (App. Div. 2001) (remanding for reconsideration where

sentencing judge held no ability-to-pay hearing, restitution

amount “was made subject to an unknown credit” for amount to be

paid by codefendant, and restitution order lacked “fixed

responsibility in terms of the obligation of either defendant”);

State v. McLaughlin, 
310 N.J. Super. 242, 264-65 (App. Div.

1998) (vacating restitution award and remanding for

reconsideration in absence of any assessment of defendant’s

ability to pay); State v. Scribner, 
298 N.J. Super. 366, 372

(App. Div. 1997) (reversing restitution order imposing joint and

several liability on codefendants and remanding for

reconsideration where State conceded restitution amount did not

reflect victims’ actual loss and court failed to assess each

defendant’s ability to pay).   Thus, in the sentencing context, a

restitution order will not survive appellate review if the

sentencing court has not specified the restitution amount and

determined whether the defendant will be capable of paying the

amount required.

                                2.

                                22
    For purposes of PTI, Rule 3:28 incorporated the core

principles that govern restitution awards in criminal

sentencing.   First, in PTI proceedings as in sentencing,

restitution exists to serve a rehabilitative goal and to

compensate the victim.   A restitution requirement could be

included as part of a participant’s service plan “when such a

requirement promises to aid the rehabilitation of the offender.”

Pressler & Verniero, Guideline 3(k) to R. 3:28, at 1292.

Indeed, Guideline 3(k) provided that admission to PTI could not

be “denied solely on the basis of anticipated inability to meet

a restitution requirement,” and authorized “symbolic or partial

restitution” when appropriate to further rehabilitation.      Ibid.

    Second, a PTI court was authorized to impose a restitution

obligation only after a careful assessment in a hearing of the

defendant’s ability to pay.   Pressler & Verniero, Official

Comment to Guideline 3 to R. 3:28, at 1294.   PTI Guideline 3(k)

mandated that any restitution requirement “be judicially

determined at the time of enrollment.”   See also Jamiolkoski,

272 N.J. Super. at 329-30 (reversing and remanding restitution

order in light of trial court’s failure to assess PTI

participant’s ability to pay); Pressler & Verniero, cmt. 3 on R.

3:28 (“Although admission may be conditioned on restitution,

there must be a hearing to determine fair restitution if the

amount is in dispute as well as the defendant’s ability to

                                23
pay.”).   Thus, before entering a restitution order, the court

was required to quantify the obligation to be imposed and

determine whether the defendant would be in a position to meet

that obligation.

    Third, the court rule governing Likakis’s admission into

PTI maintained a clear distinction between a PTI restitution

order and any civil claim that may arise from the PTI

participant’s offenses against the victim.   Subject to the

constraints of Rule 3:28(c)(1), the court was not required to

ensure that the victim will be compensated by insisting that the

participant pay the entire restitution during the PTI period.

As stated in the Official Comment to Guideline 3,

          [f]ull restitution need not be completed
          during participation in the program.        In
          determining whether a restitution requirement
          has been fulfilled, the designated judge shall
          consider good-faith efforts by the defendant.
          In appropriate cases, at the conclusion of
          participation, a civil judgment by confession
          may be entered by the court.          However,
          restitution should never be used in PTI for
          the sole purpose of collecting monies for
          victims.

          [Pressler & Verniero, Official Comment     to
          Guideline 3 to R. 3:28, at 1294-95.]

    Thus, the court was permitted to terminate PTI and dismiss

the complaint, indictment or accusation on the Civil Division

manager’s recommendation and with the parties’ consent pursuant

                                24
to 
N.J.S.A. 2C:43-13(c) and Rule 3:28(c)(1), even if the PTI

participant had not paid the entire restitution amount.

     Evidence of a restitution condition imposed in PTI,

however, was “not admissible against [the participant] in any

subsequent civil or criminal proceeding.”   Pressler & Verniero,

Guideline 3(k) to R. 3:28, at 1292.   Nor could a victim rely in a

civil action on the participant’s disclosures regarding his or

her charge in the course of supervisory treatment.   Rule

3:28(c)(5) provided that “[n]o statement or other disclosure

regarding the charge or charges against the participant made or

disclosed by a participant in [PTI] to a person designated to

provide supervisory treatment” shall be “admitted as evidence in

any civil or criminal proceeding against the participant.”6

Consistent with its rehabilitative purpose, a PTI agreement is

not intended to serve as the basis for the imposition of civil

liability.7

6  The Rule provided for an exception for statements by the
criminal division manager to the prosecutor or court as to
whether “the participant is satisfactorily responding to
supervisory treatment.” R. 3:28(c)(5).

7  With the exception of the procedure for the entry of a civil
judgment following the termination of a participant’s PTI
supervision, Rule 3:28-5(d) incorporates the procedures for the
entry of a restitution condition that were prescribed in
Guideline 3(k) and the Official Comment to Guideline 3. Rule
3:28-5(d) provides that

                               25
                                V.

    Those principles provide the framework for our

determination of this appeal.

    When the PTI court entered its order admitting Likakis to

PTI, Providence had already incurred costs in the amount of

$11,321.89 by virtue of its insurance payments to RSI Bank and

faced the prospect of substantial additional liability to RSI

Bank.   The record indicates that Providence had no objection to

Likakis’s PTI admission, as long as restitution in the amount of

$11,321.89, and indemnification for future liabilities to RSI

Bank, were made conditions of his admission.

    The PTI court appropriately took into account Providence’s

view on Likakis’s admission into PTI and its requested

conditions.   See 
N.J.S.A. 2C:43-12(e)(4), -12(e)(7).   The PTI

court did not, however, take the steps necessary to properly

          [a]   restitution    or    community   service
          requirement, or both, may be included as part
          of an individual’s service plan when such a
          requirement promises to aid the rehabilitation
          of the offender. Any such requirement and its
          terms shall be judicially determined at the
          time of enrollment following recommendation by
          the criminal division manager and consent by
          the prosecutor. Evidence of the restitution
          condition is not admissible against defendant
          in   any   subsequent    civil   or   criminal
          proceeding.   Admission to the program shall
          not be denied solely on the basis of
          anticipated inability to meet a restitution
          requirement.

                                26
impose the indemnification requirement as a condition of PTI.

It does not appear that the prosecutor or PTI Director presented

evidence of Providence’s past and prospective losses due to the

alleged arson, or attempted to estimate Providence’s prospective

liability to RSI Bank.   The record reflects no ability-to-pay

hearing at which the PTI court could assess Likakis’s current

and future resources.    The PTI court did not impose a specific

restitution obligation or payment schedule for any restitution

amount beyond the $11,321.89 that Likakis was required to pay.

    Instead, the PTI order generally required Likakis to

“[p]rotect/compensate, indemnify and hold harmless [Providence]

from any and all claims that may be brought against [Providence]

by RSI Bank.”   That provision did not quantify Likakis’s

restitution obligation, let alone ensure that the obligation

comported with his ability to pay.    Indeed, until judgment was

entered in favor of RSI Bank against Providence, no

indemnification obligation could be defined.

    In short, the indemnification provision set forth in

Likakis’s PTI agreement did not conform to the requirements of a

valid restitution condition of PTI.

    Based on the record, it appears that at the close of

Likakis’s one-year PTI supervisory period, the prosecutor did

not raise before the PTI court the question of Likakis’s

obligation to indemnify and hold harmless Providence for future

                                 27
losses, or request that the court extend PTI or dismiss Likakis

from the program.   See R. 3:28(c)(2) (providing for extension of

PTI period up to three years); R. 3:28(c)(3) (addressing orders

that PTI participant’s prosecution resume); see also 
N.J.S.A.

2C:43-13(e) (authorizing PTI court to determine after summary

hearing whether PTI participant’s violation of PTI conditions

“warrants the participant’s dismissal from the supervisory

treatment program or modification of the conditions of continued

participation in that or another supervisory treatment

program”).   There is no indication that any party or the PTI

court addressed the indemnification provision at that stage.

    Instead, the PTI court terminated Likakis’s PTI period and

dismissed his indictment with no order regarding any outstanding

restitution obligation.   With his PTI proceedings thus

concluded, Likakis had no obligation to make additional payments

under the restitution provision of the PTI court’s May 14, 2014

order.

    Even if the PTI court had imposed an appropriate

restitution condition on Likakis, requiring him to pay a

specific amount based on his ability to pay, that condition

could not have been properly admitted in this civil matter.     See

Pressler & Verniero, Guideline 3(k) to R. 3:28, at 1292.     The

invalid indemnification provision of the PTI agreement was

clearly inadmissible in this case, either as the basis for the

                                28
motion court’s grant of partial summary judgment or as the

dispositive evidence in the non-jury trial.   Ibid.8

    Accordingly, we hold that the trial court improperly

enforced the indemnification provision and entered judgment in

Providence’s favor.

                                VI.

    The judgment of the Appellate Division is reversed, and the

matter is remanded to the trial court for further proceedings

consistent with this opinion.

     CHIEF JUSTICE RABNER and JUSTICES LaVECCHIA, ALBIN,
FERNANDEZ-VINA, SOLOMON, and TIMPONE join in JUSTICE PATTERSON’s
opinion.

8  Before the trial court and on appeal, the parties’ dispute
centered on two issues: whether the trial court in this civil
matter had jurisdiction to enforce the PTI court’s restitution
order, and whether Providence was a third-party beneficiary of
the PTI agreement. Neither question is central to our
determination of this appeal. Instead, our decision rests on
the PTI statute, the version of Rule 3:28 in effect at the
relevant time, and the now-repealed PTI Guidelines.
                                29