NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE COMMITTEE ON OPINIONS

SUPERIOR COURT OF NEW JERSEY

CHANCERY DIVISION

BERGEN COUNTY

DOCKET NO. F-5952-09 CIVIL ACTION OPINION

ONE WEST BANK, FSB,

Plaintiff, v. MARIA CAPO and MR. CAPO, Husband of Maria Capo; JIM BROOKS and MRS. JIM BROOKS, Wife of Jim Brooks; PNC BANK, NATIONAL ASSOCIATION; and UNKNOWN TENANTS, Defendants, And MARVA COLEMAN, Defendant / Third Party Plaintiff, v. MARIA CAPO; JAMES M. BROOKS; LINTON O. GENTLES; SALVATION HOME BUYERS, LLC; CHARLES M. KOHOUT; INDYMAC BANK, FSB; PNC BANK, NA; JOHN DOE, I; JOHN DOE, II; JOHN DOE, III, Third Party Defendants.

Trial: May 12 and17, 2010

Decided: July 19, 2010

Gene R. Mariano, Esq., of Parker McCay, P.A., on behalf of plaintiff, One West Bank, FSB. Anthony Viso, Esq., on behalf of defendant and third party plaintiff, Marva Coleman. Peter G. Caplan, Esq., on behalf of Charles Kohout, Linton Gentles, and Salvation Homebuyers, LLC. Koblitz, P.J. Ch.

This foreclosure case demonstrates a classic example of a buy-lease-back mortgage

rescue scam with the added twist of the homeowner's total ignorance of the home sale. Plaintiff

Indymac Bank by its successor in interest One West Bank (Indymac)1 seeks to foreclose against

Maria Capo,2 the title-holder of 46 Bilton Street, Teaneck, NJ (the Property). Almost $400, 000

is owed on the Property including taxes and insurance. Capo fraudulently obtained title to the

premises by a deed from Marva Coleman, defendant/third party plaintiff,3 due to the improper

actions of third party defendants Salvation Home Buyers (Salvation), Charles Kohout and Linton

Gentles.4 Third party defendants’ fraudulent, dishonest dealings are clearly and convincingly

established and thus require that this deed be declared void ab initio. The mortgage is not valid

against the Property except in so far as an equitable mortgage is imposed. Coleman is also

entitled to compensatory and punitive damages against third party defendants.

1 The original plaintiff in this action was Indymac Federal Bank. On March 5, 2010, this Court entered an Order substituting One West Bank as plaintiff. By that point in the litigation, One West Bank had completed its acquisition of IndyMac Federal Bank, FSB a/k/a IndyMac Bank, FSB, by way of merger and acquisition. 2 The original complaint listed Maria Capo and James Brooks as defendants. The third party complaint also listed Maria Capo and James Brooks as third party defendants. A stipulation of dismissal with prejudice was filed on April 5, 2010, dismissing all claims filed between and against Maria Capo, James Brooks, and Marva Coleman. 3 Marva Coleman’s third party complaint (filed April 9, 2010) also names Indymac Bank and PNC Bank as third party defendants. In the counterclaim made against Indymac, Coleman seeks a judgment releasing the premises from the lien of the mortgage. Although evidence was not provided to support a finding that Indymac was a willing participant in the fraud perpetrated against Coleman, the relief sought was obtained by Coleman by virtue of this Court finding the mortgage void ab initio. Coleman also included a count in her third party complaint against PNC Bank, NA. Coleman alleged that Capo and Brooks obtained a mortgage in the amount of $42,200 dated November 7, 2007, from PNC bank also on the subject property. This claim is, however, rendered moot by virtue of the stipulation of dismissal entered into on April 5, 2010, by Coleman, Brooks, and Capo. 4 Third Party Defendant Linton Gentles’ surname is misspelled in the majority of pleadings and court papers filed in this matter. This opinion uses the proper spelling.

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Third party defendants mounted a joint defense with one lawyer. That lawyer did not

argue that any one of them was less involved with the scheme than the other two. Kohout is the

owner, sole shareholder, and sole employee of Salvation Home Buyers. He has various

independent contractors working with him. Since he began the company in 2004, he handled

five to six deals similar to this one before engaging in this transaction. Kohout is a thirty-two

year old graduate of East Stroudsburg University with a degree in (Physical) Rehabilitation

Services. He is self-taught in the financial arena, having taken advantage of videos and

networking meetings dealing with this sometimes profitable business. He testified without irony

that his business mission was to “help people out of difficult financial situations while

simultaneously making a profit.” None of the third party defendants are licensed real estate

brokers5 or licensed debt adjusters, 6 yet they purported to assist Coleman in refinancing and

actually sold her house.

5 State law requires that individuals acting as real estate brokers obtain licenses from the New Jersey Real Estate Commission. N.J.S.A. 45:15-1 states that:

No person shall engage either directly or indirectly in the business of a real estate broker, broker-salesperson or salesperson, temporarily or otherwise, and no person shall advertise or represent himself as being authorized to act as a real estate broker, broker-salesperson or salesperson, or to engage in any of the activities described in R.S. 45:15-3, without being licensed so to do as hereinafter provided.

N.J.S.A. 45:15-3 defines a “real estate broker” as:

a person, firm or corporation who, for a fee, commission or other valuable consideration, or by reason of a promise or reasonable expectation thereof, lists for sale, sells, exchanges, buys or rents, or offers or attempts to negotiate a sale, exchange, purchase or rental of real estate or an interest therein, or collects or offers or attempts to collect rent for the use of real estate or solicits for prospective purchasers or assists or directs in the procuring of prospects or the negotiation or closing of any transaction which does or is contemplated to result in the sale, exchange, leasing, renting or auctioning of any real estate or negotiates, or offers or attempts or agrees to negotiate a loan secured or to be secured by mortgage or other encumbrance upon or transfer of any real estate for others, or any person who, for pecuniary gain or expectation of pecuniary gain conducts a public or private competitive sale of lands or any interest in lands. In the sale of lots pursuant to the provisions of this article, the term “real estate broker” shall also include any person, partnership, association or corporation employed by or on behalf of the owner or owners of lots or other parcels of real estate, at a stated salary, or upon a commission, or upon a salary and commission, or otherwise, to sell such real estate, or any parts thereof, in lots

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Coleman, an African-American Teaneck resident, was in a particularly vulnerable

situation when this transaction took place. She was months behind in her mortgage payments,

although she had not yet received a Notice of Intention to Foreclose. Gentles, an African-

American Teaneck resident who had been mentored by Kohout, targeted Coleman through the

website njlispendens.com. He went out to her house in the summer of 2007 to see if she needed

or other parcels, and who shall sell or exchange, or offer or attempt or agree to negotiate the sale or exchange, of any such lot or parcel of real estate.

Third party defendants are engaged in the business of real estate brokers, but are not licensed. 6 A debt adjuster is defined as:

a person who either (a) acts or offers to act for a consideration as an intermediary between a debtor and his creditors for the purpose of settling, compounding, or otherwise altering the terms of payment of any debts of the debtor, or (b) who, to that end, receives money or other property from the debtor, or on behalf of the debtor, for payment to, or distribution among, the creditors of the debtor.

N.J.S.A. § 17:16G-1 (c)(1). Debt adjusters must be a non-profit entity and are required to be licensed with the New Jersey Department of Banking and Insurance. See N.J.S.A. § 17:16G-2:

a. No person other than a nonprofit social service agency or a nonprofit consumer credit counseling agency shall act as a debt adjuster.

b. It shall be unlawful for any nonprofit social service agency or nonprofit consumer credit counseling agency to act as a debt adjuster without first obtaining a license from the Commissioner of the Department of Banking pursuant to this act.

The statute does specify certain individuals who would not qualify as debt adjusters:

The following persons shall not be deemed debt adjusters: (a) an attorney-at-law of this State who is not principally engaged as a debt adjuster; (b) a person who is a regular, full-time employee of a debtor, and who acts as an adjuster of his employer's debts; (c) a person acting pursuant to any order or judgment of court, or pursuant to authority conferred by any law of this State or the United States; (d) a person who is a creditor of the debtor, or an agent of one or more creditors of the debtor, and whose services in adjusting the debtor's debts are rendered without cost to the debtor; (e) a person who, at the request of a debtor, arranges for or makes a loan to the debtor, and who, at the authorization of the debtor, acts as an adjuster of the debtor's debts in the disbursement of the proceeds of the loan, without compensation for the services rendered in adjusting those debts; or (f) a person who is: (i) certified by the United States Secretary of Housing and Urban Development as a housing counseling organization or agency pursuant to section 106 of Pub.L.90-448 (12 U.S.C. § 1701x); (ii) participating in a counseling program approved by the New Jersey Housing and Mortgage Finance Agency; and (iii) not holding or disbursing the debtor's funds.

N.J.S.A. § 17:16G-1 (c)(2). Third party defendants do not fall under any of the exceptions set forth in the statute. The only exception that could arguably apply to third party defendants is subsection e. Gentles was authorized by Coleman to arrange for a loan modification on her behalf, but the exception listed in subsection e is inapplicable here because third party defendants received compensation for their services.

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“financial assistance.” Gentles made his pitch, offering to help her keep her home if she worked

with Salvation. Coleman asked if Gentles worked for a “black-owned business.” Gentles said

yes although Kohout, the sole shareholder of Salvation, is white. Gentles said he believed he

was truthful in his response because he is an independent contractor and not an employee of

Salvation.

Gentles visited Coleman several times with Thomas DiVincenzo, another Salvation

worker who is not a party to this litigation. They advised that for a fee, Salvation could fix

Coleman’s credit so that she could obtain a better mortgage rate. Until Coleman’s credit was

repaired, in order to qualify for refinancing, Salvation would obtain the mortgage through the

name of another person who had good credit. After the refinance, Coleman could live in her

house without making any payments for six months until her credit was repaired, after which

point the unnamed individual would be removed from the mortgage.

Coleman had no intention of selling her home. She had lived in the home most of her life

and had received it from her mother’s estate six or seven years ago with a small mortgage of

$15,000. She had not contacted any real estate brokers or made any other inquires about selling

her home at any time, although she had re-financed twice previously (for $150,000 and then

$225,000) and was unable to keep up the mortgage payments on either occasion. She was

having trouble refinancing a third time due to her inability to work because of health problems.7

Gentles returned to Coleman’s home several times to discuss the refinancing of her home and to

obtain additional information. Coleman did not recall signing any documents during these visits

or when she went to the Bergenfield office of Salvation and met Kohout.

On October 9, 2007, Coleman was taken to Holy Name Hospital in Teaneck by

ambulance due to a medical emergency. She remained about a week. The day following her 7 Coleman works sporadically as a certified nurse’s assistant taking care of people in their homes.

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admission, Gentles came to the hospital with documents prepared by Salvation. Coleman, who

was receiving oxygen and multiple medications, signed numerous legal documents from her

hospital bed. Gentles could not explain the nature of these documents to Coleman because he

had not read all of them, as in his mind he served only as the notary public. Copies of most of

the documents were never provided to Coleman, who did not recall signing most of them and

even thought her signature might have been forged. The closing took place later in the day on

October 10, 2007.

The following documents were introduced into evidence by Coleman:

P-1 Standard Contract of Sale

This undated contract of sale of the Property between Coleman, as seller, and Capo, as

buyer, for a purchase price of $422,000 also states the buyer received $1,000 upon signing the

contract. The $1,000 was brought to the closing by Capo but not received by Coleman. This

document was no doubt signed at the hospital since Capo was only obtained as a buyer shortly

before October 10, 2007.

P-5 HUD-1 Statement dated October 10, 2007

Charles Kohout signed this document in reliance on a Power of Attorney signed by

Coleman.

P-6 Deed from Coleman to Capo for the sum of $422,000 dated October 10, 2007

Coleman denies signing this deed. She must have unwittingly signed it at the hospital.

TPP-5 Bank of America Cashiers Check # 0699714 dated October 10, 2007, in the

sum of $86,144

Kohout brought this check to the closing to pay the amount due from the buyers as set

forth on the HUD-1. Kohout loaned this down payment to Capo as per the Loan Agreement

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between Capo and Salvation in the amount of $86,144.87. These monies were repaid to

Salvation from the closing proceeds.

TPP-12 Letter from Coleman to Salvation dated October 24, 2007

Coleman testified that she was required to write this letter of gratitude to Salvation before

she could receive her final $500 payment.

TPP-14 Power of Attorney dated October 10, 2007 from Coleman to Kohout

Coleman denies signing this document, which must have been signed by her at Holy

Name Hospital.

TPP-16 Affidavit of Title of Coleman dated October 10, 2007:

Coleman again denies signing this document. It states that Judgment #J-249319-2007,

Holy Name Hospital vs. Marva Coleman in the sum of $37,167.43, was not against her, although

in fact it was a valid judgment against her.

TPP-18 Absolute Assignment of Rights dated October 10, 2007 by Coleman Coleman denies signing this document and did not understand what the document meant.

TPP-22 Check of Ara C. Khorozian, Esq., dated November 16, 2007 to Salvation in

the sum of $163,121.14

Kohout testified that this check was received by Salvation as proceeds from the

transaction by authority of the Absolute Assignment of Rights.

TPP-23 Loan Agreement between Capo and Salvation in the amount of $86,144.87

Kohout testified that this document memorialized the agreement between Salvation and

Capo for the loan of $86,144.87, which represented the down payment for the Property.

TPP-24 Use and Occupancy Agreement

Coleman signed this agreement in blank at Holy Name Hospital on October 10, 2007.

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Coleman received a total of $10,000 cash from what she thought was a refinance.

Initially Salvation used $500 of the $10,000 to pay for the services of an on-line “credit-repair”

business.8 Ultimately, Kohout relented and gave Coleman the final $500 after she delivered the

letter of gratitude he solicited (“all of our clients write thank you letters so we would appreciate

if you would write one”) in which she said, “I really want to say thank you for helping me in my

time of need . . . . May God bless you for future events.” Gentles testified that he understood the

arrangement to be that Coleman would repair her credit and buy her house back for the sales

price. Gentles, however, was unaware that the sales price was $422,000. Unsurprisingly, the on-

line credit restoration business was unsuccessful in restoring Coleman’s credit so she had no

financial ability to repurchase the home at any price.

Capo received ownership of the property for $1,000 and a mortgage against her in the

amount of $337,600.9 The purported sales price was based on an appraisal obtained by Salvation

and not disputed by any of the parties.10 Out of the $422,000 sales price of the house, $250,000

was used to settle Coleman’s obligations (her $37,000 debt to Holy Name Hospital was not

paid), $86,000 (the down payment) was repaid to Salvation, $20,000 went to DiVincenzo by

pre-agreement between DiVicenzo and Kohout, $20,000 was given to Gentles by Kohout in

appreciation of Gentles hard work, $15,000 was paid to Capo to pay for the first “free” six

months of Coleman’s stay in what was now Capo’s home, $2,000 went to pay for a fence, and

$10,000 was provided to Coleman (plus $500 to the credit repair company). In the end, $18,500

was left in profit for Salvation.

8 Gentles received a $67 commission for signing Coleman up for this online credit reparation service. 9 Capo settled the claim against her by deeding the Property back to Coleman. 10 Mr. Caplan, counsel for the third party defendants, improperly raises the issue for the first time in his written summation. Caplan failed to present any evidence at trial that would call into question the appraisal value obtained by his very own client.

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Coleman received $260,000 (mortgage, taxes and insurance, plus $10,000 cash payment)

of the $422,000 value in her home. She lost $162,000 in equity. Indymac provided a mortgage

of $337,600 on the strength of a phony down payment (lent by Salvation and repaid to Salvation

from the mortgage proceeds) and the good credit of Capo, all engineered by Kohout, Gentles,

DiVincenzo, and Salvation.

As Coleman seeks damages for common law fraud, she must prove the following five

elements: (1) a material misrepresentation of a presently existing or past fact; (2) knowledge or

belief by the defendant of its falsity; (3) an intention that the other party rely on it; (4) reasonable

reliance thereon by the other party; and (5) resulting damages. Gennari v. Weichert Co.

Realtors, 148 N.J. 582, 610 (1997). She bears the burden of proving the elements of fraud by

clear and convincing evidence. See Stochastic Decisions, Inc. v. DiDomenico, 236 N.J. Super.

388, 395 (App. Div. 1989) (citing Albright v. Burns, 206 N.J. Super. 626, 636 (App. Div. 1986)).

Through Gentles—an agent of Salvation—the third party defendants intentionally lead Coleman

to believe that the documents presented to her in the hospital solidified the transaction discussed

at all prior meetings with Salvation representatives. Coleman was to retain title to her home and

obtain help refinancing her mortgage and improving her credit. The documents she signed from

her hospital bed transfer title of her home to a stranger and committed her to an impossible buy-

back agreement. The third party defendants intentionally misrepresented the substance of the

documents. She never wanted to sell her house. The defendants lied to her, telling her she could

still own her home even if she signed the papers. These material misrepresentation of fact were

intended by third party defendants to induce Coleman’s reliance as evidenced by the fact that—

despite several prior meetings with Coleman at which no documents were signed—all of the

legal documents were signed by Coleman from a hospital bed, hours after she was admitted

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under emergent circumstances. Given the rapport previously developed between Coleman and

Gentles based on Gentles’ many misleading representations, as well as Coleman’s altered and

vulnerable state while hospitalized, Coleman reasonably relied on the representations made to

her at, and before, signing. As a result of her reliance on defendants’ misrepresentations,

Coleman unwittingly sold her home for $162,000 less than its value. Coleman has demonstrated

by clear and convincing evidence that Gentles, Salvation, and Kohout have committed common

law fraud.11

Plaintiff argues that it is entitled to the benefit of the holder in due course defense,

however Coleman has succeeded in proving that the fraud at issue here was fraud in the factum

and thus the negotiable instruments obtained as a result are void ab initio. Amsterdam v. De

Paul, 70 N.J. Super. 196, 199 (App. Div. 1961) (“Fraud in the factum is a good defense to an

action on a negotiable instrument as against a holder in due course, provided there has been no

negligence on the part of the maker.”). Plaintiff argues that Coleman’s conduct in signing

documents she did not read or understand is negligent, and thus she is not entitled to the relief

sought. Coleman was approached in the hospital in a weakened state, just hours after being

admitted through the emergency room. She was vulnerable physically, mentally, and

emotionally, and desperate to save her home. She did not understand the nature of the

documents she signed, nor were they explained properly to her. Her vulnerability to fraud does

not constitute negligence.

This Court having found that plaintiff’s mortgage to Maria Capo is void, therefore

dismisses plaintiff’s complaint in mortgage foreclosure with prejudice. Plaintiff is, however,

awarded an equitable mortgage on the Property in the name of Marva Coleman, to whom title

11 The conduct of the third party defendants, in addition to being common law fraud, may also constitute a violation of the Consumer Fraud Act (“CFA”), N.J.S.A. § 56:8-2. Coleman did not include a count for a CFA violation and thus the Court makes no finding as to whether or not the Consumer Fraud Act was violated.

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has properly been restored. Both Indymac, now One West, and Coleman were innocent victims

of this fraud. Coleman should not benefit unjustly at One West’s expense. One West is given an

equitable mortgage in the amount of $268,156 on the Property in Coleman’s name. This figure

represents (a) the payoff of Coleman’s first mortgage in the amount of $231,950; (b) the payoff

of judgments in Coleman’s name in the amounts of $6,000 and $1,500; (c) the payment of back

taxes in the amount of $2,830 owed by Coleman; (d) $10,000 in cash received by Coleman; and

(e) One West’s payment of real estate taxes and homeowners insurance in the amounts of

$15,116 and $760. One West was not involved in the fraud and should not be penalized beyond

losing that portion of their security in their $337,600 loan beyond Coleman’s original debt. An

equitable mortgage is appropriate. See J.W. Pierson Co. v. Freeman, 113 N.J. Eq. 268 (Err. &

App. 1933) (“If a deed or contract, lacking the characteristics of a common law mortgage, is

used for the purpose of pledging real property, or some interest therein, as security for a debt or

obligation, and with the intention that it shall have effect as a mortgage, equity will give effect to

the intention of the parties. Such is an equitable mortgage.”).

One West argues that Coleman should pay for the thirty-three months she has lived in her

home without making housing payments. As the primary victim of this scam, Coleman should

not have to pay One West for the months she has endured the uncertainty of unfairly facing the

loss of her home. One West did not at any point acknowledge the validity of Coleman’s claim,

but rather argued throughout that Coleman should take any claim against the third party

defendants to court in a subsequent proceeding after her home is lost in the foreclosure action.

Indymac extended to Maria Capo a note and mortgage on the Property with an interest

rate of 7.125% per annum, payable in monthly installments over a period not to exceed thirty

years. This Court must fashion the terms of an equitable mortgage in the amount of $268,156 on

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the same subject property almost three years later for a different borrower. The terms will

remain consistent with those terms set by Indymac in its loan agreement with Maria Capo, except

for the rate of annual interest which is hereby reduced to 4%. This reduction takes into account

the changes in the mortgage market over the past three years. No down payment is required.

Coleman has requested that she be awarded punitive damages in her action against third

party defendants, which this Court finds to be appropriate under the statute.12 Punitive damages

are permitted only when compensatory damages have been awarded. N.J.S.A. § 2A:15-5.13(c).

Compensatory damages are generally based on the plaintiff’s ascertainable loss. Coleman’s

ascertainable loss, as a result of the fraud perpetrated by the third party defendants, was partly

the $162,000 loss in the equity of her home. As a result of this Court’s intervention, this portion

of the compensatory damages to which Coleman is entitled has been satisfied by the equitable

remedy of the return of her Property. In addition to the equitable remedy, Coleman also seeks,

and is awarded, compensatory damages in the form of counsel fees.

The American Rule requires parties to bear the cost of their own litigation with some

limited exceptions. One such exception is recognized when a litigant is forced to mount a cause

of action or a defense against a third party as a result of another’s fraud. Then the defrauded

litigant may recover counsel fees from the tortfeasor for the costs of litigating against the third

party. Dorofee v. Planning Bd. of Pennsauken, 187 N.J. Super. 141, 144 (1982) (“New Jersey

case law does support the proposition that, although attorneys fees are not ordinarily included as

12 Third party defendants have not requested a bifurcated trial, pursuant to N.J.S.A. § 2A:15-5.13(a), for the purposes of determining punitive damages. Nor does the Court find the holding in Herman v. Sunshine Chemical Specialties, 133 N.J. 329, 342 (1993), to be applicable to the present case. In Herman, the Court found that even where the defendant has not requested a bifurcated trial, the Court should conduct one in assessing punitive damages. In Herman, the Court’s concern centered around the fact that evidence presented to justify punitive damages “can readily inflame an otherwise-dispassionate jury.” 133 N.J. at 337–38. The statute explicitly makes the need for a bifurcated trial conditioned on the defendant’s request, and the concerns of the Court in Herman are not relevant when the trier of fact is the Court sitting in a chancery matter, rather than a jury, thus a bifurcated trial was not necessary.

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damages in a fraud action, one who is forced into litigation with a third party as a result of

another's fraud may recover from the tortfeasor the expenses of that litigation, including counsel

fees, as damages flowing from the tort.”); Dimisa v. Quaviva, 198 N.J. 547, 554 (2009) (“That

exception reflects the principle that those fees incurred in an action against a third party are

merely additional element of ‘damages flowing from the tort.’”). As a result of the third party

defendants’ fraud, Coleman was forced to defend herself in a foreclosure action against the

lender.13 Coleman is not, however, entitled to the full amount of her counsel fees, as only the

costs incurred in litigating against Indymac are recoverable. Dimisa, 198 N.J. at 554 (“No matter

how egregious that wrongful act, in the direct action between a plaintiff and a defendant, each

party bears his or her own fees under the American Rule. It is only the requirement of litigation

against a stranger that calls the exception into play.”). Within three days counsel for Coleman

may submit a certification of services for defending the foreclosure action, leaving out the fees

incurred in the third party aspect of the litigation. Third party defendants may respond within

three days of receipt. The Court will then assess compensatory counsel fees.

Coleman has established by clear and convincing evidence that “the harm suffered was

the result of the defendant[s’] acts or omissions, and such acts or omissions were actuated by

actual malice or accompanied by a wanton and willful disregard of persons who foreseeably

might be harmed by those acts or omissions,” and thus she is entitled to the punitive damages

sought. N.J.S.A. § 2A:15-5.12(a). Here, defendants preyed on Coleman’s weakened health

condition and financial vulnerability. Defendants claimed to offer services which they were not

licensed to provide, nor which they had any intention or ability to render. The transaction

masterminded by Kohout was designed to turn a fast profit, and was executed by all involved

13 Paragraph 12 of plaintiff’s complaint includes Coleman as a defendant by virtue of her designation as an “unknown tenant.”

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with an utter disregard for the serious harm being inflicted upon the victim. Third party

defendants continuously concealed the character of their enterprise and the true nature of the

transaction.

No evidence was presented specifically addressing the wealth of the third party

defendants, however Salvation had sufficient funds to lend the down payment while Gentles

appeared overwhelmed by receiving $20,000. Kohout was definitely in the superior financial

situation. The statute dictates that an award of punitive damages must be specific as to each

defendant. N.J.S.A. § 2A:15-5.13(e). The purpose of the award of punitive damages is to deter

the wrongdoer from repeating similar conduct.14 This Court hereby awards $75,567 in punitive

damages.15 The Court awards $20,067 in punitive damages against Gentles. This was the

amount Gentles personally profited in carrying out the plan devised by Kohout. The Court

awards punitive damages in the amount of $55,500 against Kohout. This is three times the profit

Kohout realized on this fraudulent deal. The Court finds Kohout to be the ringleader and most

culpable party. Kohout prides himself on Salvation’s business model—an elaborate scheme

designed to take advantage of individuals in dire financial situations. Kohout’s testimony and

demeanor reflect a total lack of awareness of the egregious nature of his conduct. His casual,

flippant, self-important attitude and disrespect for Coleman and others in economic distress was

readily apparent. Kohout's arrogance is exemplified by the letter of gratitude he required

Coleman to write after he defrauded her.

14 The Appellate Division has made clear that the purpose is specific rather than general deterrence. Tarr v. Ciasulli, 390 N.J. Super. 557 (App. Div. 2007). 15 Although not raised in the current litigation, the Court is cognizant of the fact that there exists a circuit split on the issue of whether punitive damages are dischargeable in bankruptcy. The Third Circuit, however, has definitively held that punitive damages incurred as a result of fraud are non-dischargeable in bankruptcy, based on the court’s reading of 11 U.S.C. § 523 (a)(2)(A). See Cohen v. De La Cruz, 106 F.3d 52 (3d Cir. 1997).

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Pursuant to N.J.S.A. § 2A:15-5.17, copies of this Opinion will be forwarded to the

Offices of the Bergen County Prosecutor and the Attorney General “for investigation as to

whether a criminal act has been committed by the [third party] defendant[s].”

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