COURT OF APPEAL JUDGMENT

QUEBEC COURT OF APPEAL JUDGMENT

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Gelber c. Kwinter (Estate of) 2008 QCCA 1838

COURT OF APPEAL
CANADA
PROVINCE OF QUEBEC

REGISTRY OF MONTREAL
No: 500-09-017687-070
(500-17-015893-038)

MINUTES OF THE HEARING

DATE: September 29, 2008

CORAM: THE HONOURABLE ANDRÉ FORGET, J.A.
ALLAN R. HILTON,

J.A. NICOLE DUVAL HESLER, J.A.

APPELLANT(S) ATTORNEY(S)

AARON GELBER Mtre Ronald H. Levy

NORMAN STERNTHAL DE GRANDPRE CHAIT

RESPONDENT(S) ATTORNEY(S)

THE ESTATE OF THE LATE DAVID KWINTER Mtre Pierre Bourque

LAVERY DE BILLY

MIS EN CAUSE ATTORNEY(S)

L’OFFICIER DE LA PUBLICITÉ DES

DROITS DE LA CIRCONSCRIPTION

FONCIÈRE DE MONTRÉAL

On appeal of a judgment rendered on April 5, 2007 by the Honourable Mr. Justice John
H. Gomery of the Superior Court, district of Montréal.

NATURE OF THE APPEAL: Memorandum of Agreement - Nullity

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Clerk: Robert Osadchuck Court Room: RC-14

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HEARING

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10 h 25 Representations by Mtre Levy 11 h 04 Recess

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11 h 20 Resumption of the hearing

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1 h 23 Representations by Mtre Levy

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12 h 00 Representations by Mtre Bourque 12 h 40 Recess

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14 h 00 Resumption of the hearing

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14 h 03 Representations by Mtre Bourque 14 h 05 Reply by Mtre Levy

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14 h 13 Recess

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14 h 27 Resumption of the hearing

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14 h 27 By the Court: For reasons to be filed later in the record of the Court, and which will
appear in the Minutes of the hearing, the appeal is dismissed, with costs

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(s) Robert Osadchuck

Court Clerk

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BY THE COURT

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JUDGMENT

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[1] Aaron Gelber and Norman Sternthal appeal the dismissal of their action in conveyance of title by the Honourable Mr. Justice John H. Gomery, as well as the maintenance in part of a cross demand by the respondent condemning them to pay $123,134 together with interest and the additional indemnity, plus expert fees of $5,483.

[2] The central issue in this Court is whether the trial judge correctly concluded that a written agreement between the appellants and the late David Kwinter dated June 11, 1984 that formed the basis of the action in conveyance of title was null as the result of fear (articles 994 to 996 inclusively of the Civil Code of Lower Canada). The appellants seek the reversal of the judgment of the Superior Court, the dismissal of the respondent's cross-demand, and the maintenance of their action in the Superior Court in accordance with its conclusions.

[3] David Kwinter had married Aaron Gelber's sister Laya, thus making them brothers-in-law. Laya passed away in 1977. David Kwinter remarried but died in 2001 after having spent most of his retirement years in Florida. Hirsh and Stephen Kwinter are the sons of David Kwinter. Hirsh Kwinter is the administrator of his father's Estate pursuant to the laws of Florida.

[4] The legal dispute relates to a residential complex in Beaconsfield that comprises 74 rental properties that was built in the early seventies. The appellants and David Kwinter were the undivided co-owners of the property during the latter’s lifetime, and his Estate succeeded to his position upon his death. During the relevant period, the Beaconsfield property was being administered by the subsidiary of a company owned and operated by the appellants, and each of the co-owners was entitled to receive their share of the net rental revenues.

[5] Pursuant to negotiations and discussions between Aaron Gelber and David Kwinter that took place in 1984, an agreement was reached on June 11, 1984 that provided a means for the appellants, acting jointly, to purchase the undivided one-third interest of David Kwinter in the Beaconsfield property "in the event of the death of KWINTER or his disagreement with GELBER and/or STERNTHAL regarding the administration or disposition of the PROPERTY". Based on this provision, the appellants notified Hirsh Kwinter, in his capacity as the administrator of his father's Estate, that they were exercising their option to purchase the undivided one-third interest of his late father. This notification was later followed by the service of a notarial deed of protest and the subsequent institution of the action in conveyance of title that the trial judge dismissed.

[6] The respondent's contention that it was entitled to a declaration of the nullity of the agreement was based on factors that were unrelated to the Beaconsfield property and its administration, but rather to other events that placed Aaron Gelber in a position of influence over Hirsh and Stephen Kwinter and control over the distribution of funds to David Kwinter.

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[7] These factors were alleged to be pressure exerted on Hirsh and Stephen Kwinter to abandon potential litigation against other members of the Gelber family, including Aaron Gelber, relating to the estate of their late sister Laya brought about by the inability of Hirsh and Stephen Kwinter to benefit from the distribution of the proceeds of her estate owing to its illiquidity. Hirsh Kwinter had also personally paid taxation debts of his sister's estate without having been reimbursed. The issues relating to Laya’s estate were finally resolved in May of 1984.

[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.

[10] The trial judge summarized his findings of fact in the following manner:

[51] The evidence, and the presumptions that can reasonably be inferred from the established
facts, enable the Court to come to the following conclusions:

a. at the time the Agreement was signed, David Kwinter feared the
consequences if he or his sons caused Aaron Gelber to become angry, or "get mad;"

b. Aaron Gelber deliberately played upon this fear by retaining Kwinter's share of the mortgage money until after the Agreement was signed;

c. the Agreement was disadvantageous to David Kwinter to such an extent that it must be presumed that his main reason for signing it was a direct consequence of his fear of Aaron, and the latter's reaction if he did not sign it;

d. the Agreement caused a serious prejudice to the economic interests of David Kwinter and his Estate;

e. the fear which inspired David Kwinter to sign the Agreement, although subjective,
was not unreasonable, considering his state of economic dependence on the sums of money he received as his share of the revenues of Beacon Hill Villa.

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[11] The trial judge also concluded as a fact that David Kwinter had not ratified the agreement after its execution by his conduct, since the appellants always had the unilateral right under its terms to invoke a disagreement that would trigger the application of the option to purchase, which David Kwinter had every interest in avoiding.

[12] In assessing the appellants' grounds of appeal, it is first appropriate to mention that it does not belong to this Court to re-try the case as if the judgment at trial had never been rendered. The findings of fact of the trial judge are amply supported by the evidence, including in particular the transcript of a lengthy telephone conversation between Aaron Gelber and Hirsh Kwinter in February of 1984. The trial judge drew inferences from that evidence that were well within his discretion. To the extent that the appellants' position in this Court depends upon the variation of any of these findings of fact, the Court must take the facts as determined by the trial judge in the absence of a palpable and overriding error. No such error has been shown.

[13] For example, the appellants ask the Court to re-interpret the evidence and to reverse a finding of fact that there was economic dependency that vitiated David Kwinter’s consent. To achieve that end, they have combed through the evidence to show aspects of it that illustrate that no money was ever withheld from David Kwinter. It is not disputed, however, that Aaron Gelber arranged to retain the $100,000 owing to David Kwinter until after he signed the June 11, 1984 agreement, despite the fact that Aaron Gelber and Norman Sternthal received their share of the mortgage re-financing as soon as it became available.

[14] Nevertheless, that is not the real issue, since vitiation of consent has to be examined at the time the consent was given. The real issue is whether David Kwinter entertained the fear that were he to refuse to sign the agreement containing the option or subsequently challenge its validity, monies would be withheld from him. As the respondent contends that fear is what prompted David Kwinter to consent to the agreement containing the option, the question of whether funds were later withheld is academic for the purpose of determining whether or not his consent was validly given.

[15] The issues to be resolved by the trial judge were whether David Kwinter had given his consent under duress, whether he had reason to fear that monies would be withheld, and whether there was economic dependency that had the effect of vitiating his consent. The answer to these questions is fact driven, and the appellants have not satisfied the Court that there is a proper basis to interfere with the trial judge’s findings.

[16] The evidence is clear that Aaron Gelber was mixing apples and oranges in relating problems with the estate of his sister to monies he owed David Kwinter. As Aaron acknowledged having told David Kwinter during his telephone conversation with Hirsh Kwinter in February of 1984, "I was supposed to give him some money", and, "So I told your dad that I want to settle my affairs with him as well as the estate affairs jointly and severally". Later in the conversation, he said this: "…I'd like to settle with your father because the money is lying in the bank,1 and it's true, it has nothing to do, one thing has nothing to do with the other, but I'm using this as leverage and it's unfair, well, you'll, as I told your father, you'll have to take me for the good or the bad."

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1 The money in question was money to which David Kwinter was then already entitled.

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[17] Such circumstances remove what Aaron Gelber did from the simple exercise of legitimate economic leverage by one contracting party against another. His attempts to explain what he meant during this conversation did not impress the trial judge, who found him to be evasive, self-contradicting and affected by a defective memory.

[18] The trial judge was also right to hold that since the agreement contained the continuing possibility for the appellants to manufacture a disagreement and thus to trigger the application of the option to purchase, David Kwinter's acceptance of money subsequent to the agreement could not properly amount to ratification.

[19] The Court therefore rejects the appellants' first ground of appeal.

[20] The appellants further argue that since they and David Kwinter also signed a management agreement at the same time as the agreement containing the option to purchase, the Superior Court erred "grievously" in pronouncing the nullity of the latter while at the same time respecting the enforceability of the former between the date of its execution and the death of David Kwinter.

[21] The appellants cite no authority for the proposition they invoke. Clearly, the two contracts were distinct in nature. Although the management agreement was not produced as an exhibit, there is no suggestion of any prejudice arising out of it to David Kwinter, or that it was unreasonable for him to have signed it, especially since he was not resident in Montreal. The existence of a contemporaneous contract between the same parties may be a factor in assessing the validity of the other; however, the absence of a defect in the formation of one contract does not preclude the presence of such a defect in the other contract when it deals with an entirely different subject matter.

[22] This ground of appeal also fails.

[23] The appellants also assert that the trial judge did not properly apply sections 7 and 77 of An Act respecting the implementation of the reform of the Civil Code, 2 which provide as follows:

7. Juridical acts which may be annulled when the new legislation comes into force may not be annulled thenceforth for any reason which is no longer recognized under the new legislation.

77. No action based on fear induced by a third person in a party to a contract made before the coming into force of the new legislation may henceforth be received or maintained if the violence exerted or the threats made by the third person were unknown to the other party at the time the contract was made.

[24] The appellants contend that since there was no evidence that Norman Sternthal was aware of the conduct of Aaron Gelber, the respondent could not obtain the nullity of the agreement, but only assert a claim in damages against Aaron Gelber. The judgment of the Superior Court is silent on this issue. The argument, however, runs counter to the terms of the option clause in the agreement, which requires Messrs. Gelber and Sternthal to act jointly, as if they were one party.

[25] In any event, although Mr. Sternthal did not testify, the evidence as a whole would allow for the

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2 S.Q. 1992, c. 57.

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conclusion to be reached that both he and Aaron Gelber were jointly responsible for the withholding of the $100,000 until after David Kwinter signed the agreement, especially since Mr. Sternthal is described as being in charge of finances. He could not have been unaware of the disequilibrium resulting from him and Mr. Gelber each receiving their share of the mortgage re-financing as soon as the money became available, and the equivalent payment to David Kwinter being substantially delayed for improper
reasons.

FOR THESE REASONS, THE COURT:

[26] DISMISSES the appeal with costs.

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ANDRÉ FORGET, J.A.

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ALLAN R. HILTON, J.A.

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NICOLE DUVAL HESLER, J.A.