
    NISSIM HADJES, INC., a Florida corporation, Appellant, v. Nicholas Di COSTANZO, Appellee.
    No. 66-284.
    District Court of Appeal of Florida. Third District.
    April 4, 1967.
    Rehearing Denied May 1, 1967.
    
      L. J. Cushman, Miami, and Donald S. Rose, Miami Beach, for appellant.
    Milton R. Adkins, Miami, for appellee.
    Before PEARSON and SWANN, JJ„ and NATHAN, RAYMOND G., Associate Judge.
   RAYMOND G. NATHAN, Associate Judge.

In this action both parties to this appeal sought to quiet title to a section of land in Dade County. This appeal is from a summary final decree in favor of the appel-lee, Nicholas Di Costanzo, plaintiff below.

The material facts are undisputed. Appellant, Nissim Hadjes, Inc., and appellee claim their titles from a common source. The appellee deraigns his claim of title through a warranty deed, absolute in form, from the Richards Land Development Corporation to Nicholas Di Costanzo, as trustee, recorded May 28, 1958, and a quit claim deed from Nicholas Di Costanzo, as trustee, to Nicholas D. Costanzo (plaintiff), recorded July 12, 1965.

Appellant deraigns its claim of title under a warranty deed directly from Richards Land Development Corporation to appellant, recorded September 29, 1958.

Contemporaneously with receipt of his trust deed, which purportedly conveyed six sections of land (including the section in controversy) Di Costanzo executed a declaration of trust whereby the Casino De Capri, a Cuban corporation, was named the beneficiary. The trust declaration did not recite any purpose for its execution nor was there any evidence it was recorded.

In his deposition, Di Costanzo, in substance, testified that immediately prior to the receipt' of his trust deed one Berko-witz, president of the grantor, Richards Land Development Corporation, personally owed a balance of $55,000 on a pre-existing debt to the Casino De Capri, beneficiary, under the trust declaration. Di Costanzo further testified he personally paid $5,000 of Berkowitz’s Casino debt, but his testimony (and the record) is not clear as to whether said $5,000 payment was made prior to or subsequent to the trust deed conveyance to Di Costanzo.

In connection with the acquisition of his trust deed, Di Costanzo in his deposition in response to the following questions answered :

• “A. Well, this man, Berkowitz at the time I was President at the Casino De Capri and this Berkowitz used up quite a large sum of the casino’s money, once the time come to produce the money and he just produced a part of it. * * *
“So finally I seen that he had ran out of his resources because he put a second mortgage on his house * * * (s)o in order to make it come to a closing, I said, ‘All right,’ I says, T will O.K. the five thousand for you through the office,’ which later on I paid at the cashiers in the casino, and now he owed fifty thousand more * * *
“I said, ‘Now you mortgaged your houser * * *. How are you going to pay this-money? You got all the sections of land.', you tried to sell me one time.’ I says, ‘Yom better put up security, you know, you might, drop dead.’
«* * *
* * *
“So he gave me, it is about six sections-of land, for security * * *
“Q. Yes.
“A. So as he raised the money, I had: to release some of the land because he was-making contracts, selling back and forth,. so I had to release some of those in order to deliver the deeds and so he could pay off this fifty.
“So now I said, ‘What are you going to< do with my five, because you paid the casino and you forgot my five which I O.K.’d/
“He said, ‘Well, I got a section, I’ll give it to you, that will break us about even SO' you are satisfied.’
“I says, ‘Well, I am and I ain’t, but you better give it to me. In the event you are not able to raise the money, at least I got something.’ ”

The record conclusively shows that Berkowitz’s debt to the casino was fully paid and Di Costanzo, as trustee reconvey-ed to Richards Land Development Corporation five of the six sections included in his original trust deed. Two of said sections were reconveyed October 19, 1958, and three sections were reconveyed December 10, 1958.

The record further shows that Berko-witz died before he paid his personal debt of $5,000 he owed to Di Costanzo. The date of Berkowitz’s death is not established. Di Costanzo further testified that Berkowitz had died and could not repay his $5,000 debt so conveyance of the section of land in controversy was then made by himself, as trustee, to himself individually on July 9, 1965 to take care of the debt Berko-witz owed him.

Di Costanzo’s deposition in connection with the 1965 conveyance to himself contains the following questions and his response :

“Q. Do you know what the reason was for signing a deed to yourself?
“A. Well, I was trustee. Now when he agreed to give me the section for the $5,000 I had paid the Casino for, so naturally now I got to give myself a deed. So, as trustee it is questionable, but when it is conveyed to me now, it is mine.
“Q. I see. Anyway, he was dead and you didn’t have any chance of getting the $5,000 out of him, so you just deeded it to yourself, is that what you mean?
“A. He was dead, there was no doubt he couldn’t pay me.
“Q. Is that the reason you transferred it to yourself ?
“A. Evidently it must be.”

The record also discloses that the appel-lee and the appellee’s immediate predecessor in title, Nicholas Di Costanzo, Trustee, paid all the taxes due on the land in controversy from the time the trust deed was acquired to the time of the filing of this action below. There is however, no claim of possession by either of the parties to this appeal.

Appellant contends that 1) the original conveyance from Richards Land Development Corporation to Di Costanzo, as trustee, constitutes a mortgage under 697.01 F. S.A. and 2) was invalid as such since said conveyance was given as security for Berkowitz’s personal debt. On the basis of the record the latter contention is without merit, so we shall deal only with appellant’s first contention.

F.S. Section 697.01 F.S.A. provides:

“All conveyances * * * or other instruments * * * conveying * * * property, either real or personal, for the purpose or with the intention of securing the payment of money, whether such instrument be from the debtor to the creditor or from the debtor to some third person in trust for the creditor, shall be deemed and held mortgages, and shall be subject to the same rules of foreclosure and to the same regulations, restraints and forms as are prescribed in relation to mortgages. Provided, however, that no such conveyance shall be deemed or held to be a mortgage, as against a bona fide purchaser or mortgagee, for value without notice, holding under the grantee.”

Regarding the construction and application of the above-quoted statute, it is stated in 22 Fla.Jur., Mortgages, section 94, pp. 215-17:

“Courts of equity are guided more by the substance than by the form of the transaction in ascertaining whether an instrument is a mortgage. Also, under the controlling statute, neither form nor superficial declaration of intention will be allowed to successfully obscure the true nature of the transaction. The stat ute is regarded as having been designed to insure effectuatipn of the genuine intention and purpose of the parties by subordinating thereto the ostensible form in which transaction is finally couched.”
“Accordingly, the fact that an instrument is in form a deed absolute does not preclude the interpretation thereof as a mortgage. In deciding the question of whether a deed is, in fact, a mortgage, the Court may take into consideration the paper itself, or the instrument in connection with contemporaneous writings or agreements concerning the subject matter, or by the aid of extraneous evidence that will determine the decision of the question. The attitude of the parties relative to the conveyance after its execution may also be considered. In case of doubt the instrument should be construed to be a mortgage.”

Appropriately, it is also stated in part of section 95, p. 217, Fla.Jur., supra:

“The fact that an instrument is designated as a deed of trust, or a trust deed, is not conclusive in regard to the construction of the character thereof as a mortgage or otherwise. A trust agreement and a deed absolute in form may be •construed together as constituting a mortgage, or as security for advances made and to be made. The question is whether the conveyance to a trustee is to provide for the discharge of the obligation of the grantor to the cestui que trust. If executed to secure debts owed by the obligor, not for the purpose of selling property, the trust deed will be deemed to be in the nature of a mortgage.”. -

The fact that appellee paid the taxes from the acquisition date of the trust deed to the time of filing of this action is consonant with his view that a conveyance rather than a mortgage was intended. Chinn v. Llangollen Stable (C.C.A.6th) 109 F..2d 66 (1940); Lindsley v. Hamlet, 235 Ala. 335, 179 So. 234 (1938).

Considering the entire transaction in light of the record and all the applicable principles, we are constrained to -hold that the trust deed from Richards Land Development Corporation to Di Costanzo was, in fact, a mortgage. Neither party to this .appeal has contended that a valid trust was intended.

Moreover, we conclude that a mortgage was intended notwithstanding 689.07 F.S.A. appears to provide to the contrary. In Arundel Debenture Corporation v. Le Blond, 139 Fla. 668, 190 So. 765, 767 (1939), the Florida Supreme Court said;

“While it is true that by virtue of section 5666, Compiled General Laws of Florida 1927 [subsequently renumbered 689.07 F.S.] * * *, the conveyances under which Schultz acquired the property involved, vested in him a fee simple title, with full power and authority to sell, convey and grant both the legal and beneficial interest in the real estate, Willys-Overland, Inc. v. Blake et al., 97 Fla. 626, 121 So. 884; it is likewise true that such a conveyance will not preclude a Court of Equity from declaring this to be a resulting trust, unless there be prior equities that will prevent such being done.
“The strict construction sought by defendant to be placed upon section 5666, Compiled General Laws of Florida 1927 * * *, was never intended in the Willys-Overland case supra. This section * * * was intended to prevent secret trusts, to convey the beneficial title to the grantee along with the legal title, in order to prevent any fraud being perpetrated upon all who might subsequently rely upon the record when dealing with the grantee.”

Though 689.07 F.S.A. was amended in 1959, it does not appear that the aforementioned intention as interpreted by our Supreme Court in Arundel in 1939 has been modified by said amendment. So by analogy to the reasoning in Arundel, supra, and the principles of law heretofore stated we must arrive at the conclusion that a Court of Equity is not precluded from declaring the conveyance to Di Costanzo, as trustee, ostensibly within the ambit of 689.07 F.S. A., a mortgage. Obviously, Di Costanzo was not a purchaser without notice of the true nature of the transaction sub-judice.

The parties, each claiming title from a common source, were required to show a better title from that source to prevail. McDaniel v. McElvy, 91 Fla. 770, 108 So. 820, 51 A.L.R. 731 (1926). See also the annotations in 5 A.L.R.3rd 375. Each only needed to trace his title to the common source and not prior thereto. Dayton v. Patton, 80 Fla. 763, 86 So. 702 (1920); Laganke v. Sutter, 137 Fla. 71, 187 So. 586 (1939). The mere fact that both parties claim under a common source did not dispense with the requirement that ap-pellee establish that he acquired title from the common source. Holliday v. Guill, 196 Ga. 723, 27 S.E.2d 398 (1943)

Accordingly appellant is entitled to have its title to the land in controversy quieted subject to any interest, if any, ap-pellee acquired in the mortgage held by the Casino De Capri, as mortgagee. Appellee is also entitled to reimbursement for all taxes paid by him.

We specifically refrain from determining whether the Casino’s mortgage might have been legally satisfied and discharged.

Reversed.

SWANN, Judge

(dissenting).

The majority opinion has reversed a summary final decree in favor of the plaintiff, Di Costanzo, and quieted title in the defendant-counterclaimant, Hadjes. In so doing, the majority has taken a properly executed, previously recorded warranty deed and relegated it to the status of a mortgage, at best, so that title could be quieted in Hadjes, who had constructive notice of the prior deed, and who admitted to having had no dealings with the corporate grantor, admitted to having never paid the taxes on the property, and admitted to having ceased to purchase land more than two and a half years before the execution of the deed under which he claims. This hardly seems equitable, particularly since in view of the admissions by Hadjes above, it would appear that the instrument he claimed under would itself be entitled to no more weight than a mortgage.

Although it has frequently been held in actions between grantor and grantee, or debtor and creditor, that any doubt as to the true nature of an instrument should be resolved in favor of construction as a mortgage rather than an absolute deed, I believe that a stricter rule must be applied to quiet title actions between a stranger-conveyee, taking with notice of a prior recorded deed, and the original grantee (here, Di Costanzo). I believe that a strong presumption arises that the nature of the transaction was that which the instrument itself purports to indicate, to-wit: an absolute deed. Parenthetically, the trustee for the corporate grantor has chosen not to defend this action by allowing a decree pro confesso to be entered against it.

It is my view that a stranger seeking to have a prior recorded warranty deed construed as a mortgage must sustain a heavier burden of proof to rebut this presumption than a mere preponderance required in most civil litigation:

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“In construing as mortgages instruments absolute in form, matters of proof are of paramount importance. Generally, the burden of showing that the transaction was a mortgage rests on the party maintaining that this was the intention. Since there is a strong presumption that the parties intended just what the instrument purports to be i. e., an absolute conveyance, and since there is an obvious temptation to false swearing, there is a heavier burden of proof to establish the instrument as a mortgage than that which exists in most civil litigation. Generally, the evidence must be clear, convincing or substantial.”
******

On the basis of the record before us, I believe that Hadjes has failed to meet this burden and consequently has failed to rebut the presumption. At the most, Hadjes might be entitled to have the cause remanded so that further evidence may be introduced, if there is any, and a full evidentiary hearing may be held. He has not asked that the cause be remanded for further proceedings, however. He argues that he is entitled to a final decree as a matter of law on the record as it now stands. I cannot agree,

The essential facts now before us show that on May 16, 19S8 Richards Land Development Corporation, by its president, Berk-owitz, conveyed by warranty deed the land here in dispute to Nicholas Di Costanzo, as trustee. This warranty deed was properly recorded in the Public Records of -Dade County, Florida, on May 28, 1958.

On May 16, 1958 Di Costanzo, as trustee, signed a declaration of trust for the benefit of Casino de Capri, S. A., a Cuban corporation (not a party to this action). Following the signature of Di Costanzo, as trustee, there was a separate paragraph entitled “acceptance of the terms and conditions of the declaration,” with a line for the signature of Casino de Capri, S. A., by its proper officer. This “acceptance of the terms and conditions of declaration” was .not executed and there is no evidence that the declaration of trust was ever recorded. Subsequently, on September 24, 1959, Casino de Capri executed a quit claim deed back to Di Costanzo and he then conveyed from himself, as trustee, to himself, individually, on July 9, 1965. Both instruments were recorded on July 12, 1965 in Dade County, Florida.

In the meantime, on August 21, 1958, after conveying to Di Costanzo as trustee, Richards Land Development Corporation, by its president, Berkowitz, conveyed the land here in question by warranty deed, for the second time, to Nissim Hadjes, Inc. This deed was recorded September 29, 1958 in Dade County, Florida.

As between Di Costanzo and Hadjes, Di Costanzo is entitled to the strong presumption that the duly executed warranty deed represents the true intention of the convey- or at the time the deed was executed and recorded. Furthermore, it is not disputed that Di Costanzo paid the taxes on the property. This, as the majority acknowledges, tends to favor construction as a deed, rather than as a mortgage.

Hadjes claims to have lost the papers relating to the closing of his transaction, even though the nature of his corporation’s business since 1944 had been to “lend, buy, sell, invest.” Hadjes said that he dealt only with Berkowitz individually and did not know anything about Richards Land Development Corporation, the corporate grant- or under which he claims. He also stated that he had ceased to purchase land more than two and a half years prior to the execution of the deed under which he claims title, and only loaned money after that.

Hadjes’ deposition shows that, although he had. purchased land on numerous other occasions and had been represented by attorneys in the past, he had no abstract prepared on this property and had no attorney represent him in this matter.

Section 689.07, Florida Statutes, F.S.A., provides, in essence, that a deed such as the one to Di Costanzo, as trustee, conveys fee simple title to the land with full power and authority in the grantee to sell, convey or grant the legal and beneficial interest in the land conveyed, unless a contrary intention appears in the deed, or unless there appears of record at the time of recording such deed a declaration of trust by the grantee, declaring the purposes of such trust. It would appear, then, that under the provisions of this statute, Di Costanzo was vested with fee simple title to this land.

While Di Costanzo’s deposition was not altogether precise, it appears that the sum Di Costanzo advanced was apparently equal in amount to that which Berkowitz had invested in the land and Berkowitz ceased to make any payments to Di Costanzo after the execution of the deed. A deed absolute on its face will not be construed as a mortgage where, after its execution, there remains no indebtedness from the grantor to the grantee.

27 Fla.Jur., Quieting Title, § 26, states:

“A suit to quiet title may not be defeated by showing that the complainant’s claim or interest, otherwise sufficient to support the complaint, is subject to possible superior rights in third persons who are not parties to the suit. Nor can the suit be defeated by showing that the title under which both parties claim is defective. It is enough that the interest asserted by the complainant is superior to that of those who are parties defendant. In the event that he claims from a common source, the complainant must show that he has a better title from that source, but need not trace his title further than such common source.”
* * * * * *

Under Section 695.01, Florida Statutes, F.S.A., Hadjes would have constructive notice of the recorded warranty deed, dated May 16, 1958, to Di Costanzo, as trustee, and would have been on notice under Section 689.07 that the deed conveyed the fee simple title to Di Costanzo because no contrary intention appeared therein, and because there was not of record at the time of recording of that deed a declaration of trust declaring the purposes of the trust.

Both parties herein derive title from Richards Land Development Corporation. It appears to me that the recorded title of Di Costanzo must be construed as superior to that of the appellee. I believe that the holding of the majority is unjust and inequitable in that it permits the conveyee of a deed of a section of land in Dade County, Florida to obtain the entire section subject only to a possible mortgage of $5,000 when it affirmatively appears that the conveyee had constructive notice of a prior superior title; and furthermore, that he later had actual notice of the prior deed for approximately one and one half years, but failed to take any action to resolve the question of his alleged ownership until such time as Di Costanzo initiated this quiet title suit.

I am of the opinion that as between the two parties herein seeking to quiet title, equity and justice would best be served in affirming the final decree heretofore entered by the chancellor in this cause. 
      
      . See e. g. McLendon v. Davis, Fla.App. 1961, 131 So.2d 765; Marcus v. Hall, 142 Fla. 306, 195 So. 170 (1940).
     
      
      . 2 Boyer, Florida Heal Estate Transactions, § 32.02, at p. 1005 (1966). See also: Powell, Real Property, § 447, at p. 598 (1900).
     
      
      . Brumick v. Morris, 131 Fla. 46, 178 So. 564 (1938).
     