Marvin G. STACKS, Petitioner, v. EAST DALLAS CLINIC et al., Respondents, 409 S.W.2d 842

GREENHILL, Justice. This is an action in which Marvin G. Stacks seeks to recover double the amount of usurious interest paid by him to the defendants, East Dallas Clinic, C. N. Duncan, M.D., R. D. Mahon, M.D., Walter H. Patton, M.D., William T. Green, M.D., and East Dallas Hospital, Inc., under

article 5073. The determination of the case necessarily requires a construction of that statute.

Article 1728 § 3. Trial was to a jury in county court where the court instructed a verdict in Stack’s favor. Judgment was entered for plaintiff in the amount of $305.10. The Court of Civil Appeals sitting at Tyler reversed and remanded. 397 S.W.2d 558. The question presented for decision here is whether the defendants received a benefit from the usurious interest paid to them by Stacks and which they in turn paid to a third person. We hold they did not.

The suit was instituted by Stacks against East Dallas Clinic, a partnership of physicians above named and East Dallas Hospital, Inc., a corporation that owns the hospital used by these physicians. Since these two organizations operated in effect as one entity, they will be hereinafter referred to as the Clinic. Stack’s wife had an operation at the East Dallas Hospital in February of 1961, and her physician was from the East Dallas Clinic. The total bill was $652.90.

Stacks signed two notes payable to the Republic National Bank, one for $325.00, due the Clinic for the doctor’s bill, and the other for $327.90, due the Hospital for hospital charges. Benson, the Clinic’s credit manager, told Stacks that the monthly payments on the two notes would be $54.41 for twelve months, and these were to be deposited with the bank. Twelve times $54.41 equals $652.92 — within two cents of the amount owed. At the same time Stacks signed the two notes, he also filled out and signed two applications for credit addressed to W. H. (Joe) Bailey and the Dallas Retail Credit Managers Association.

Bailey was the auditor of the Association and had no connection whatsoever with the Clinic except as set out below. The Dallas Retail Credit Managers Association had worked out a plan with the Republic National Bank to enable debtors of various Dallas businesses to pay their bills. The debtor would apply to Bailey, otherwise known as the Dallas Retail Credit Managers Association, for a loan in the amount of the debt. At the same time, the debtor would sign a note payable to the Republic National Bank which would be endorsed by the creditor to the extent of the amount due him.

The application form and note were forwarded to Bailey, who checked them, and forwarded them to the bank. The bank would pay the amount of the note (debt) to the creditor, and then collect monthly payments from the debtor. Bailey paid the bank five percent interest on the notes. Stacks and his wife made out separate checks, one to the East Dallas Clinic for $32.50, and the other to the East Dallas Hospital for $32.79. Benson, the Clinic’s credit manager, told the Stackses that these checks were for interest.

The interest equalled ten percent of the total amount due, but we shall assume that it was usurious because it did not take into account the monthly payments which would reduce the balance of the principal. The Clinic deposited the two interest checks to its account. The Clinic then wrote Bailey two checks of its own for $32.50 and $32.79, which were forwarded to him by the Clinic together with the two notes and applications. The Clinic retained none of this “interest.” Bailey sent the notes to the bank, which forwarded cashier’s checks in the amount of $325.00 and $327.90, respectively, to the Clinic.

Stacks made two monthly payments of $54.41 to the bank. Thereafter the payments proved to be too large for Stacks to handle; so he asked Benson to reduce the monthly payments. Benson called Bailey to ask him if the payment could be reduced and extended, and if so, what the charge would be for doing this. The balance of the two notes was consolidated into one note for $544.10, and a renewal and interest charge of $81.61 made. Stacks wrote a check payable to the Clinic for $81.61 and gave it to Benson. This check was deposited in the Clinic’s bank account. The Clinic sent its own check to Bailey for the $81.61.

The Clinic took up the two original notes on which they were shown to be endorsers, and made payment to the bank for the balance owed thereon. The new note for $544.10, together with the $81.61, was sent to Bailey, who forwarded the note to the bank as before. The bank promptly remitted $544.12 to the Clinic. Stacks made regular payments on the consolidated note until June 8, 1962, when he again fell behind. The bank then sent the note back to the Clinic, and charged it with the balance of $362.74. Stacks made two additional payments totaling $45.34 to the bank after June 8.

The bank credited the Clinic’s account with only $39.69 of this, however, retaining $5.65 as a “late collection” charge. The Clinic turned the note over to a Dallas collection agency which collected the balance from Stacks. This suit was then filed by Stacks to recover the alleged usurious interest.

Article 5073 reads in part: “Within two years after the time that a greater rate of interest than ten per cent shall have been received or collected upon any contract, the person paying the same or his legal representative may by an action of debt recover double the amount of such interest from the person, firm or corporation receiving the same. * * *” [Emphasis added.] “Receiving” as used in the statute means “benefiting” from the interest paid. Commerce Trust Co. v. Best, 124 Tex. 583, 80 S.W.2d 942 (1935); Deming Inv. Co. v. Giddens, 41 S.W.2d 260 (Tex.Civ.App.1931, writ dism’d).

These cases are controlling here. This Court noted in the Best case, cited just above, that a cause of action to recover double the amount of interest paid is derived from a statute creating a penalty. It is not a suit in tort. Since the statute is one involving penalties, this Court in that case said that the statute would be strictly construed and that “the language of the statute is not to be given a mere literal construction.” In the Best case, the original lender did collect the interest and forwarded it to the then holder of the indebtedness. In that sense, as here, it “received” the interest.

This Court, speaking through Judge Smedley, stated, “This statute was intended to penalize one who exacts and receives the benefit of usury, not every one who may be connected with its collection.” 80 S.W.2d at 947. . While the Best and Giddens cases dealt with the receipt of interest by a trans-feror (payee) for value of the notes in question and remittance of this interest to his transferee, the principle stated is applicable to this case. The Clinic received the interest from Stacks, and promptly remitted payment in an equal amount to Bailey. The Clinic did not lend Stacks any money.

The only benefit the Clinic received was the collection of its account from Stacks. A “benefit” from the interest refers to a direct benefit from the receipt and retention of the interest itself, and not to something so incidental as the collection of an account receivable, admitted due, as in this case. This Court will look through the form to the substance of a transaction; and the substance here bears out defendant’s contention that it only collected the interest for another, and received no benefit from such interest itself.

Stacks next contends that in a usury case, payments are allocated to principal first and interest last; therefore, the last payments made by Stacks to the collection agency and by the agency to the Clinic should be regarded as the actual interest payments. This rule has no application to our case. Here, the advance payments made by Stacks to the Clinic were for interest. The Clinic told Stacks that the payments would not apply to reduce the principal of the notes. Likewise, Mrs. Stacks testified that she knew the first two advance payments were for interest.

Where the parties designate a payment as interest, then interest it will be. Adleson v. B. F. Dittmar Co., 124 Tex. 564, 80 S.W.2d 939 (1935); Rosetti v. Lozano, 96 Tex. 57, 70 S.W. 204 (1902); Hamilton v. Bill, 90 S.W. 2d 929 (Tex.Civ.App.1936, writ ref’d). Further, Stacks contends that, even if the “benefit”

interpretation of

article 5073 prevents a double recovery from the Clinic, the Court of Civil Appeals erred in not allowing a recovery for the single amount of the interest paid to the Clinic. We overrule this contention. Nowhere in his pleadings does Stacks assert a cause of action for recovery of the single amount of usurious interest alone. He bases his entire cause of action on a double recovery under

article 5073; and under these circumstances, a recovery for the single amount of interest paid will not be allowed, notwithstanding a prayer for general relief. Adleson v. B. F. Dittmar Co., 124 Tex. 564, 80 S.W.2d 939 (1935); Jennings v. Texas Farm Mortg. Co., 124 Tex. 593, 80 S.W.2d 931 (1935). Finally we come to the question of what judgment should be entered by this Court. The trial court instructed a verdict for Stacks. The Court of Civil Appeals found error. It was of the opinion that Stacks was not entitled to recover under Deming Inv. Co. v. Giddens, and Commerce Trust Co. v. Best, discussed above.

Ordinarily this would result in the reversal and rendition of the judgment by the Court of Civil Appeals. Without any explanation, however, that court reversed and remanded the cause for a new trial. The Clinic et al. filed no application for writ of error. That being so, there can be no rendition in its favor. Henderson v. Gunter, 160 Tex. 267, 328 S.W.2d 868 (1959). The judgment of the Court of Civil Appeals is, therefore, affirmed. SMITH, NORVELL, STEAKLEY and POPE, JJ., dissenting. . Tex.Rev.Civ.Stat.Arm. art. 5073 (1962).

All references to statutes herein are to Vernon’s Annotated Revised Texas Civil Statutes. . The statute was amended in 1963 in ways not considered material to this case. Acts 1963, 68th Leg., p. 550, ch. 205, § 28.