Short answer. A court will look past the label and treat the transaction as an equitable mortgage if any of the circumstances in Article 1602 of the Civil Code are present, including, most broadly, any case where the real intention of the parties can be fairly inferred to have been securing a debt. The deed calling it a sale is not decisive.
What the law says
The contract shall be presumed to be an equitable mortgage, in any of the following cases
Civil Code, Article 1602 — When a Sale Is Really a Mortgage. Read the full provision →
What the law says
In any other case where it may be fairly inferred that the real intention of the parties is that the transaction shall secure the payment of a debt or the performance of any other obligation
Civil Code, Article 1602 — When a Sale Is Really a Mortgage. Read the full provision →
Substance over the label on the deed
Courts do not treat a deed as conclusive simply because it is titled a sale or a pacto de retro. Article 1602 exists precisely to look past the label: it presumes a contract to be an equitable mortgage whenever any of several listed circumstances are present, because those circumstances suggest the parties' real intention was to use the property as security for a debt rather than to complete a genuine transfer of ownership from seller to buyer.
The specific circumstances the law looks for
Article 1602 lists several concrete signs that a supposed sale is really a mortgage: an unusually inadequate price, the seller staying in possession as lessee or otherwise, a later instrument extending the redemption period, the buyer keeping back part of the price, or the seller being made to pay the property's taxes. Any one of these, standing alone, is enough to trigger the presumption that the deed is not what its label says it is.
The catch-all: the parties' real intention
Beyond that specific list, Article 1602 adds a broader catch-all: the presumption also applies in any other case where it may be fairly inferred that the real intention of the parties is that the transaction shall secure the payment of a debt or the performance of any other obligation. This means the listed circumstances are not exhaustive; a court can look at the whole picture of how the parties actually behaved and what they seem to have intended, even where none of the specific listed circumstances squarely fits the facts.
What this means once the presumption applies
Once a transaction is treated as an equitable mortgage rather than a sale, Article 1602 also affects what any money, fruits, or other benefit received by the supposed buyer is called: it is treated as interest, subject to the laws on usury, rather than as income from owning the property outright. In effect, the buyer is treated functionally as a lender holding the property as collateral, and the seller keeps the substantive protections of a debtor rather than having permanently lost the property.