This case law is found in In re Jay, 308 B.R. 251, 284–85 (Bankr. N.D. Tex. 2003), subsequently rev’d, 432 F.3d 323 (5th Cir. 2005). The case also discusses Tex. Prop. Code § 41.006, a statutory remedy for some pretended sales. In fact, pretended sales involving and condition of defeasance is void. Tex. Const. Article VXI, chapter 50(c).
Texas courts have long held that an instrument written as a deed absolute on its face may, in fact, be a mortgage on homestead property in violation of the Texas Constitution. See Johnson v. Cherry, 726 S.W.2d 4, 6 (Tex.1987); Loving v. Milliken, 59 Tex. 423, 1883 WL 9191 *2–*3 (1883); Ruffier v. Womack, 30 Tex. 332, 1867 WL 4594 *6 (1867); Mosher Steel & Mach. Co. v. Nash, 6 S.W.2d 158, 162 (Tex.Civ.App.-Dallas 1928, writ dism’d w.o.j.); Nagle v. Simmank, 54 Tex.Civ.App. 432, 116 S.W. 862, 863 (1909, writ ref’d) (affirming finding that deed conveying business homestead was void as a pretended sale). “If there was a debt due from the grantor to the grantee, or a loan made, which the instrument secures, the transaction will be deemed a mortgage, let it be disguised as it may.” Loving, 59 Tex. 423, 1883 WL 9191 at *2 (emphasis added). Texas courts employ equity to look past the language and form of a deed to determine whether such deed represents a bona fide sale or a pretended sale: “if a loan is established and not a payment of purchase money, equity construes the deed to be a mortgage.” Loving, 59 Tex. 423, 1883 WL 9191 at *3.
“The question of whether an instrument written as a deed is actually a deed or is in fact a mortgage is a question of fact.” Johnson, 726 S.W.2d at 6. The true consideration for a deed may be shown by parol evidence to be different from that expressed in the deed. See id. at 7; Buccaneer’s Cove Inc. v. Mainland Bank, 831 S.W.2d 582, 584 (Tex.App.-Corpus Christi 1992, no writ). In fact, not only *285 may the court consider parol evidence, but “the courts must look beyond the face of the deed to ascertain the parties’ intent.” Johnson, 726 S.W.2d at 7. If a deed is executed contemporaneously with, or pursuant to, a contract or a lease, such multiple documents are “to be viewed as parts and parcels of one entire transaction.” Ruffier, 30 Tex. 332, 1867 WL 4594 at *5. In the case of an alleged pretended sale, it is not necessary that the condition of defeasance appear in the deed itself; an option to purchase under a lease agreement suffices to create the constitutionally mandated condition of defeasance. See Ruffier, 30 Tex. 332, 1867 WL 4594 at *6; Nash, 6 S.W.2d at 161. It does not matter that, according to the documents, there is no enforceable or absolute debt owed by the grantor to the grantee, or that the grantor is under no obligation to repurchase the property. See Johnson, 726 S.W.2d at 6 (reversing judgment of appellate court which had held that “[w]ithout an enforceable obligation or debt, the deed could not be converted into a mortgage”). Rather, “[w]hen there is a fact finding that the parties intended the transaction to be a loan, and that finding is supported by probative evidence, the law will impute the existence of a debt.” Id.
However, where the parties intended the sale to be genuine and absolute, albeit subject to defeasance in the form of the grantor repurchasing the property, the sale is not a pretended sale and the deed may not be converted into a mortgage. See Hardie v. Campbell, 63 Tex. 292, 1885 WL 4373 (1885); Mansfield v. Orange Inv. Co., 260 S.W. 307, 308 (Tex.Civ.App.-Beaumont 1924, no writ). Thus not every sale of a homestead involving a condition of defeasance is void. See id. The intent of the parties is the most important consideration. See Firstbank v. Pope, 141 B.R. 115, 118–19 (E.D.Tex.1992); Johnson, 726 S.W.2d at 6. If the parties intended a sale to be genuine, then such sale cannot be a pretended sale so as to be prohibited by the Texas Constitution; if the parties intended the sale to act as security for a debt, such sale may constitute a pretended sale. See, e.g., Firstbank, 141 B.R. at 118–19; Ketcham v. First Nat’l Bank of New Boston, Tex., 875 S.W.2d 753, 756 (Tex.App.-Texarkana 1994, no writ). “In order to support a judgment for the [grantors] on their deed-as-mortgage theory, all the court … [is] required to find … [is] that the transaction … [is] not intended as a sale.” Bantuelle v. Williams, 667 S.W.2d 810, 814 (Tex.App.-Dallas 1983, writ ref’d n.r.e.).