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THE THREE EVIDENTIARY PILLARS OF VICTORY
The Estate of the Late David Kwinter’s (the “Estate”) ability to successfully defend Aaron Gelber and Norman Sternthal’s (the “Plaintiffs”) legal action to enforce a June 11, 1984 option agreement (the “Contested Option Agreement”) that granted the Plaintiffs the right to purchase David Kwinter’s undivided 1/3 interest in a large residential rental property located in Beaconsfield, Quebec (the “Beacon Hill Villa Project” or the “Rental Property”) upon a dispute in the management of the Beacon Hill Villa Project or the death of David Kwinter, faced considerable legal and evidentiary challenges. The Contested Option Agreement was purportedly signed by David Kwinter (the “Deceased”) with full independent legal advice and remained the operational agreement between the Deceased and the Plaintiffs (the "Parties"), who were the other co-owners of the Beacon Hill Villa Project, from the date of signature by the Parties in June of 1984 until the Deceased’s death on December 7, 2001. For 17 years, the Deceased acquiesced with and benefited from the Plaintiffs’ management of the Beacon Hill Villa Project, received monetary distributions from the Rental Property and never objected to the Plaintiffs’ management of the Beacon Hill Villa Project or to the terms, or even the very existence, of the Contested Option Agreement. Yet, despite these obvious evidentiary barriers, and the heavy adverse presumptions that arose from this evidence, the Estate was able to defeat the Plaintiffs’ claim to enforce the Contested Option Agreement by successfully arguing that the Contested Option Agreement was only secured through the direct, illegal and coercive actions of the Plaintiffs. It was a defence that was accepted by the trial judge, whose condemnatory judgement was fully confirmed by the Quebec Court of Appeal.
How was this surprising legal victory accomplished? The roots of the Estate’s victory can be traced to three significant pieces of evidence that the Estate relied on at trial: 1) the extraordinary tape recording of the February 1984 telephone conversation between Aaron Gelber and the Deceased’s eldest son, Hirsh Kwinter, where Aaron Gelber can be clearly heard repeatedly issuing threats that he would continue to improperly withhold "substantial" amounts monies that were legally due the Deceased in order to force the Deceased and his sons to settle the Deceased’s late wife’s estate in a manner that was favorable to Aaron Gelber and other members of the Gelber family; 2) a letter from the Deceased’s U.S. based lawyer to the Plaintiffs’ lawyer written just, 23 days before the Deceased signed the Contested Option Agreement that clearly showed the state of the Deceased's mind, that he was emotionally attached to the Beacon Hill Villa Project and did not want to sell his ownership interest; 3) Aaron Gelber’s remarkable and unexpected admission under cross-examination at trial that he only advanced the monies to the Deceased that he was improperly withholding with respect to the Deceased’s interest in Beacon Hill Villa Project, after David Kwinter had signed the Contested Option Agreement. These separate, but inter-related pieces of evidence, constituted the Three Evidentiary Pillars of Victory that allowed the Estate to secure a remarkable court victory in this long, drawn out legal dispute.
The Tape-Recorded February 1984 Telephone Conversation
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This 45 minute long tape recording of a telephone call between Hirsh Kwinter and Aaron Gelber in February 1984, which Aaron Gelber referred to as the 'problem call' at the trial, played a critical role in that it provided the Trial Judge with a clear opportunity to assess the character and credibility of Aaron Gelber. Of equal importance, the taped telephone recording provide the Court with the Rosetta Stone to understanding the genesis of the Disputed Option Agreement: Aaron Gelber’s efforts to intercede in the increasingly confrontational efforts of David Kwinter’s sons (the “Kwinter Brothers”) to settle the estate of their late Mother, Laya Gelber Kwinter, (the “Laya Kwinter Estate”) in which they were the main beneficiaries. Laya Gelber Kwinter passed away in October, 1977. At the center of the dispute was the contested valuation of a number of properties owned by the Gelber family (the “Gelber Properties”) in which Laya Gelber Kwinter, Aaron Gelber and other family members had ownership interests in. Despite their best efforts, which included the Kwinter Brothers’ agreeing to sign away dividends owed to them as result of Laya Kwinter Estate’s ownership in the Gelber Properties (the “Estate’s Interest”) which monies were supposedly going to be used to fund the purchase of the Estate’s Interest, the promised buyout/settlement of the Laya Kwinter Estate never took place. With no settlement in sight after almost seven years of negotiations, the Kwinter Brothers decided to simply ask for the return of the dividends that they had signed away in reliance of the promised buyout of the Estate’s Interest and advised Elieazer Gelber, Aaron Gelber’s brother, who was then managing the Gelber Properties, that they would be simply retaining the Estate’s Interest. This new position adopted by the Kwinter Brothers worried Elieazer Gelber who immediately reached out to Aaron Gelber to see if Aaron Gelber could convince David Kwinter to restrain and control the Kwinter Brothers in their demands related to the buy out of the Estate's Interest. Aaron Gelber readily agreed to intercede in the dispute and immediately telephoned the Deceased who, at the time was retired and residing in Florida. During this telephone call, Aaron Gelber openly threatened the Deceased and said that unless he was able to get the Kwinter Brothers to drop their demands for the return of their dividends and accept whatever offer of settlement Elieazer Gelber advanced with respect to the purchase of the Estate’s Interest, Aaron Gelber would withhold monies that were otherwise due and payable as a result of David Kwinter’s one third co-ownership interest in the Beacon Hill Villa Project in which the Plaintiffs owned the remaining two thirds interest. It is important to note, that the Laya Kwinter Estate had no interest in the Beacon Hill Villa Project. Alarmed, the Deceased called his son Hirsh Kwinter and related what had occurred in his recent telephone call with Aaron Gelber and alerted Hirsh Kwinter to expect a call from Aaron Gelber about the request that the Kwinter Brothers had made with respect to the return of their dividends and their intent to retain the Estate’s Interest. Aaron Gelber did, as predicted, telephone Hirsh Kwinter and repeatedly threatened to illegally withhold monies owed to David Kwinter from his co-ownership interest in the Beacon Hill Villa Project unless the Kwinter Brothers agreed to accept whatever amount that Elieazer Gelber offered to purchase the Estate’s Interest or sign a 'meaningful' agreement wherein they agreed to surrender all rights to resort to litigation to secure a purchase or liquidation of the Estate’s Interest. Aaron Gelber smugly admitted that his conduct was unfair but that the Deceased had no choice but ‘to take me for the good or the bad - and the bad I should say’. Aaron Gelber stated that while it was unfair for him to make his affairs with the Deceased and the settlement of the Laya Kwinter Estate ‘jointly and severally,” he was using this tactic as 'leverage' to get what he wanted: no litigation with respect to the settlement of the Laya Kwinter Estate. Unbeknownst to Aaron Gelber, Hirsh Kwinter had tape recorded this seminal telephone conversation. Ultimately, Aaron Gelber, got what he wanted, as the Kwinter Brothers, in an effort to shield their Father from further financial harm from the Plaintiffs, agreed to accept a buy out of the Estate's Interest on May 3, 1984 that largely mirrored the last offer that they had received and initially rejected from Elieazer Gelber.
During the trial, Mr. Justice Gomery pointed out the importance of the February 1984 taped recorded telephone conversation when he stated:
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You know, when we hear cases which involve what was said by A to B, most of the time we get contradictory versions and the Court is left with the difficulty of deciding who said what. But I don't have that difficulty here because I have a transcript and I've listened to the tape.
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In reaching his decision to set aside the Contested Option Agreement, Mr. Justice Gomery makes repeated references to the taped telephone conversation. Aaron Gelber's open and unmistakable threats to continue withholding monies due the Deceased unless the Kwinter Brothers agreed to settle the Laya Kwinter Estate on terms that Aaron Geber was offering, allowed the Trial Judge to accurately measure the character of Aaron Gelber and determine that he was a person who would do or saying anything to get his way. In addition, it provided the Trial Judge with ample support to draw the proper inference that when viewed with all the other relevant evidence, that the Deceased only signed what was a one way option agreement that totally favored the Plaintiffs as a direct result of Aaron Gelber's illegal, coercive behaviour.
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The May 18, 1984 Letter From David Kwinter's Lawyer
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Throughout the pre-trial discovery process and at trial, Aaron Gelber testified: that the Contested Option Agreement reflected the wishes of David Kwinter to put into place a legal mechanism that would allow the children of the owners of the Beacon Hill Villa property to easily resolve any disputes relating to the management of the property. Aaron Gelber repeatedly asserted that the Deceased's agreement to entering into the Contested Option Agreement was in his, David Kwinter's, best interests. At his examination for discovery held on December 12, 2003, Aaron Gelber testified as follows:
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Me. Ronald Levy
Q. 47 What led to this agreement, I think, is Mr. Bourque's question.
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Aaron Gelber
A. I met ... David Kwinter is my brother in law, married to my deceased sister, and we had a business relationship, this and a few other things. And my sister passed away, Mr. Kwinter left Montreal, went to Florida, and he re-married. The woman's name, Gail whatever. His son, Hirshy, to my knowledge, wasn't too happy with the marriage, and the father and the son were not on speaking terms. This is prior to eighty-four.
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Me. Pierre Bourque:
Q. 50 What led to this agreement, I think, is Mr. Bourque's question.
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Aaron Gelber
A. David Kwinter was in Montreal at one point, and I tried to bring the son and the father together, so at least there's some relationship there. And I called him up to meet with him and we got into a discussion, "Your father's in town, maybe it's a good time to, you know, get together", blah, blah, blah. And the meeting didn't go very well. Hirshy Kwinter said that, "When my father dies," he's going to buzz the company. So, I says, "What does that mean?" "I'm going to bring the property to sheriff's sale. After the meeting, I left the apartment, there was no more discussion. I met David Kwinter in Florida, because they went there every winter, and I told him, "I chose you as a partner. I didn't choose your son. I'd like to have an agreement with you so at least we know where we stand in case something happens to you or to me." That's what started this agreement. He agreed with me and he said, "prepare a draft." And I went to Fishman. And after that, the Lawyers took it in hand.
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Me. Pierre Bourque:
Q. 95 I see that this memorandum only provides the triggering of the option in the event of the death of Mr. Kwinter.
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Aaron Gelber
A. That is right.
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Me. Pierre Bourque:
Q. 96 And not on your death.
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Aaron Gelber
A. That is right.
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At his continuing examination for discovery held on July 6, 2004, Aaron Gelber continued to maintain the fallacy that somehow the Contested Option Agreement, which provided the Plaintiffs with a one-way option, was in the best interests of both Parties.
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Me. Pierre Bourque:
Q. 155 Fine. It is stated in this document [ Paragraph 27 of the Plaintiffs Plea] which emanates from you and Mr. Sternthal, that:
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"Plaintiff, Aaron Gelber was convinced that some sort of agreement which would avoid him or his children having to deal with his nephew after David Kwinter's ultimate death was in the interest of all the parties."
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Are you saying that it was in the interest of Mr. Kwinter?
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Aaron Gelber:
A. It was in the interest of the next generation that an agreement be made. Because of the threat that was made by one of the Kwinters that they would buzz the company, that was a threat. I wanted an agreement what happens in the next generation, after we're both, what would happen. We met, we had an agreement that most likely his family would not take over the property, they were not in the business, they didn't know about the management, it was in the best interest of all concerned that an agreement be put in place because of the threat.
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At trial, Aaron Gelber, during both examination in chief and on cross-examination, continued to maintain that there was an element of mutuality in the circumstances leading up to the signing of the Contested Option Agreement and that the final form of the Contested Option Agreement was something that the Deceased wanted and had agreed to:
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Me. Pierre Bourque:
Q. 245 I see. Would you tell the Court what transpired between David Kwinter and yourself when you saw him?
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Aaron Gelber:
A. I told David, if I can address him that way, about the meeting we had in the apartment of Hirsh Kwinter. I gave him exactly the details of what they said about him. I suggested to him that we should have some sort of contract because of the threat, and he agreed.... essentially agreed to it right away.
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Me. Pierre Bourque:
Q. 249 Would you tell the Court what was the discussion between David Kwinter and yourself, about the agreement you proposed?
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Aaron Gelber:
A. The agreement proposed that I propose that there would be, upon his death, an agreement whereby I would have an option to purchase his interest in Beacon Hill Villa. There was a discussion about - how should I put it? - would it be an outside ... upon his death, would I buy his shares out right. And I told him I couldn't commit myself to that. I wasn't sure where the next generation is going to go and I requested an option. That was the principal discussion that I had with him. And then we agreed that we each get a lawyer and I went back home and I asked my lawyer to draft up an agreement. I gave him the two principal issues.
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Me. Pierre Bourque:
Q. 282 What you stated through your lawyers was that you were convinced that some sort of agreement which would avoid you or your children having to deal with Hirsh or David Kwinter was in the interest of all the partners. All the partners , that included David Kwinter, am I not correct? Would you tell the Court what was the discussion between David Kwinter and yourself, about the agreement you proposed?
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Aaron Gelber:
A. Yes the partner was David Kwinter.
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Me. Pierre Bourque:
Q. 283 I see. Would you tell the Court what interest you saw in the option agreement for David Kwinter?
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Aaron Gelber:
A. I think the interest is, I'm sure, he wouldn't want to see litigation between the cousins, his children and my children. That was the interest.
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Me. Pierre Bourque:
Q. 284 Okay. Did he tell you that?
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Aaron Gelber:
A. I suggested it, not him.
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Me. Pierre Bourque:
Q. 285 Did he agree?
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Aaron Gelber:
A. Yes.
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Me. Pierre Bourque:
Q. 56 What was the consideration, what was the interest for Mr. Kwinter to sign this agreement?
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Aaron Gelber:
A. I think, if I recall correctly , the interest was to avoid any litigation on all parties at a future date if there was a contract in place. That's what we were both looking for..
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Aaron Gelber's position is, of course, complete nonsense as the Contested Option Agreement provided no benefits to the Deceased and, as it only created a one-way option in favour of the Plaintiffs who could exercise the option at a time of their choosing, it completely failed in providing David Kwinter with the mechanism he supposedly wanted: a straightforward means that would be available to resolve future disputes between his and Aaron Gelber’s children. More importantly, the Contested Option Agreement put the Deceased at risk of losing his interest in the Beacon Hill Villa project if the Plaintiffs manufactured a dispute in the management of the property which would then give the Plaintiffs the right to purchase David Kwinter’s interest in the property. The Deceased's reluctance to enter into any form of agreement that placed his continuing ownership in the Beacon Hill Villa property at risk was clearly evidenced in the correspondence exchanged between the Parties’ respective lawyers in the time period leading up to the Deceased's signing of the June 11, 1984 dated Contested Option Agreement. Mr. Justice Gomery found that these exchanged letters provided important “insight into what preceded the signature of the Agreement that was concluded as of June 11, 1984” and what the true intentions of the Parties were. This correspondence included a May 18, 1984 letter wherein the Deceased'’s lawyer explicitly confirms his client’s desire to retain his ownership in the property :
At the outset let me state it is Mr. Kwinter’s position that in the event of a death of Mt. Gelber or Mr. Sternthal, because of his position outside the province of Quebec, that he will be, in all likelihood, unable to directly consider the purchase of any partner’s interest in the partnership. It is also Mr. Kwinter’s position that when Beacon Hill Villa was constructed, he placed a great amount of effort and expertise into the construction and is most desirous of retaining his interest in the project.
Notwithstanding this letter’s clear message of the Deceased’s passionate intention and desire to retain his interest in the Beacon Hill Villa property, a mere 23 days later, the Deceased signed the Contested Option Agreement that placed his very ownership in the property, at risk. In Mr. Justice Gomery’s findings, he concludes that the Deceased ignoring his lawyer’s advice, capitulated, like his sons had done in resolving their Mother's estate, and entered into an agreement that provided no benefit to him. In Paragraph's 43 and 45 of his Judgement, Mr. Justice Gomery writes:
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[43] It is apparent that in signing this document David Kwinter abandoned all of the advice, proposals and suggestions that had been made on his behalf by his lawyer, and accepted totally the terms and conditions that had been proposed by Aaron's lawyer. The Agreement is completely one-sided and provides no protection or consideration to David Kwinter. By signing it he exposed himself throughout the life of the Agreement to the possibility that Aaron and Sternthal would choose to disagree with him at a moment in tine chosen by them with respect to the administration of the Property, which would trigger the option provisions granted in their favour.
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[44] It is impossible to imagine what benefit David Kwinter would realize by the signature of the agreement, except to satisfy the desire of Aaron Gelber that he do so. Plaintiffs argue that the Agreement was signed by him with the benefit of advice from counsel, but the correspondence between the lawyers indicates exactly the contrary; it is most probable that David Kwinter did not obtain or follow his lawyer's advice and signed the draft agreement which had been prepared by Fishman without modification. Like his sons had done on May 3, he capitulated.
In all the circumstance, the Trial Judge held that the only rationale explanation for David Kwinter’s ‘capitulation’ was the undue pressure and coercion that Aaron Gelber had subjected him to. Similar to the tactics that Aaron Gelber had employed in securing a settlement of the Kwinter Brothers’ Mother’s estate, Aaron Gelber had used the leverage of holding back monies owed to the Deceased to gain his, David Kwinter's, acceptance of the one-way option agreement. It was, in Mr. Justice Gomery’s mind, a clear case of a leopard never changing its spots.
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Aaron Gelber’s Crucial Admission at Trial
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Aaron Gelber's startling and open admission during his cross-examination at the trial, that he paid the considerable amounts of money that were owed to David Kwinter, only after David Kwinter had signed the option agreement, constituted the proverbial final nail in the coffin of the Plaintiffs' case to enforce the Contested Option Agreement. Aaron Gelber's admission, provided irrefutable confirmation of the Estate's claim that the Contested Option Agreement was unenforceable in law on the grounds that it had been secured through Aaron Gelber's use of unconscionable and illegal coercive actions. In upholding the Trial Judge's decision to strike down the option agreement the Quebec Court of Appeal held:
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[8] The essence of the claim related to undue pressure that amounts to fear was that Aaron Gelber was in a position to control the payment of the net revenues from the Beaconsfield property to which David Kwinter was entitled, as well as the distribution to him of $100,000 to which he was entitled as the result of the re‑financing of the Beaconsfield property. Despite the resolution of matters relating to the estate of Laya Gelber, David Kwinter was not paid this significant sum of money until after he signed the agreement containing the option clause in June of 1984. There is also evidence that Aaron Gelber said he would withhold David Kwinter’s share of net revenues to be used as his contribution should it ever have been necessary to incur capital expenses for the Beaconsfield property.
[9] The evidence before the trial judge made it clear that Aaron Gelber knew, in effect, that the issues related to his sister's estate had nothing to do with the money owing to David Kwinter relating to the Beaconsfield property, but that he acted in this way as he considered it a legitimate negotiating tactic to take advantage of the leverage he enjoyed over David Kwinter. Indeed, with respect to Aaron Gelber's explanations as to his conduct, trial judge found that he was not a truthful witness.
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The Quebec Court of Appeal in its unanimous opinion wrote that the Trial Judge was correct in determining that the evidence presented at trial properly allowed him to reasonably infer: that at the time the Contested Option Agreement was signed, the Deceased feared the consequences if he or his sons caused Aaron Gelber to become angry, or "get mad"; that Aaron Gelber deliberately played upon this fear by retaining the Deceased's share of the mortgage money until after the Agreement was signed; and that the Contested Option Agreement was so disadvantageous to the Deceased that it must be presumed that David Kwinter's main reason for signing the Contested Option Agreement was a direct consequence of his fear of Aaron Gelber and the latter's reaction if the Deceased did not sign it. One of the most telling pieces of evidence that allowed both the Trial Judge and the Quebec Court of Appeal to reach the reasonable inference of the existence of vitiating duress and fear, was the frank admission of Aaron Gelber at trial that he only paid the substantial monies he was improperly withholding from the Deceased after the Deceased had signed the Contested Option Agreement which was inarguably of no benefit to him and provided Aaron Gelber with the tool and means of dispossessing the Deceased's of his interest in the Beacon Hill Villa project at a time and cost most favorable to the Plaintiffs. It was truly a 'Perry Mason' moment. Only in this case, it wasn't a TV show; but a pivotal moment in a real life drama that changed the lives of the Kwinter Brothers who had struggled for decades to secure justice for both of their parents and the preservation of their rightful inheritances.