
    The Equitable Trust Company of New York, Respondent, v. Charles A. Newman, Appellant.
    (Supreme Court, Appellate Term,
    May, 1911.)
    Contracts—Validity of contracts — Contracts involving violation of positive statute — Contract of insurance company for rebate.
    Cumulative remedies — Exclusive remedy.
    Insurance companies — Control and regulation — In general — Discrim- . ination prohibited.
    Negotiable instruments — Indicia or requisites—Unconditional.-
    An instrument in the form of a letter, by which the person insured by a policy of life insurance acknowledges the receipt of the policy and authorizes it to be “placed in force” and promises to pay a certain sum in a specified manner for the first annual premium, is not intended to be a present unconditional engagement and is not a negotiable instrument.
    An agreement for a rebate upon the annual premium of a life insurance policy is in contravention of law and void.
    Section 89 of the Insurance Law does not provide a specific penalty for giving rebate which should be considered exclusive, but simply provides the manner in which the Superintendent of Insurance may restrain future disobedience. •
    Appeal by .the defendant from a judgment of the City Court of the city of New York, entered ¡upon a verdict rendered in favor of the plaintiff by direction of the court and .from an order denying a motion for a new trial.
    Kauffman & Herzberg (Leon Kauffman and Joseph Herzberg, of counsel), for appellant.
    McLear & McLear (Robert E. McLear, of counsel), for respondent.
   Lehman, J.

The plaintiff has brought suit alleging that it is the holder for value of a note made by the defendant. The answer contains a general denial and several affirmative defenses setting forth that the instrument was signed and delivered to an agent of the general agent of the Equitable Life Assurance Society, upon his promise to allow the defendant a rebate of $234, and his promise to have the said policy cancelled after its issuance.

At the trial the plaintiff introduced in evidence the following instrument:

“ New York, December 19, 1903.

Mr. Archibald C. Haynes,

" General Agent,

“ The Equitable Life Assurance Society,

“No. 25 Broad Street, N. Y.:

“ Dear Sir.— I hereby acknowledge having received from Mr. Geo. Schlesinger policy No. 1,288,163, being for $20,-000 on my life, in the Equitable Life Assurance Society. You are authorized to place the said policy in force from this date, and I promise to pay you or your order the first annual premium amounting to $634.60, as follows:

a Very truly yours,

“ 'Charles A. Newman.”

and gave testimony that it was a holder for value.

The defendant then tried to show that, at the time the instrument was signed -and delivered, the agent promised to allow him a rebate of $234, and that this amount was crediteon the amount payable under the instrument. This evidence was excluded on the ground that it tended to vary a written instrument, and that in any event no such defense would be available against a holder for value of a negotiable instrument. .

Upon a motion to set aside the verdict, the - trial justice rendered a careful decision sustaining his view that the instrument constitutes a negotiable instrument. See Equitable Trust Co. v. Newman, 69 Misc. Rep. 494. But, in spite of the authorities cited therein, I am unable to concur in his conclusion. These authorities, when analyzed, merely hold that, where an unconditional promise to pay is coupled with a statement of the circumstances out of which the indebtedness arose, or of the consideration for the indebtedness, such statement does not render the promise to pay conditional or deprive an instrument having all the elements of a negotiable instrument of its negotiable character. The principle underlying all these cases is well set forth in the case of Davis v. McReady, 17 N. Y. 230, 232. If one will issue his negotiable paper and send it into the world in consideration of an engagement of the party with whom he deals to do some act for his benefit in future, he declares in effect that he will pay the note or bill according to its terms to any one who shall become the holder for value in the course of business and rely for his own indemnity upon the promise he has received as the consideration for issuing it.”

The mere fact that an instrument in negotiable form, promising absolutely to pay a sum of money, contains a statement of a future consideration does not render the promise conditional upon the due performance and receipt of the future consideration. In this case, however, the instrument signed by the defendant is in. the form of a letter and not of a note. It recites the receipt of a» policy of insurance and gives the agent authority to make the policy effective; and, by fair construction, it is not intended to be a present unconditional engagement, but is conditional upon the agent performing his part of the contract. While no special form is necessary to render an instrument negotiable, in this case the fact that the instrument is not in the usual form of mercantile paper and does not appear to have been intended to pass as such must .be considered upon the question of whether the defendant intended to make an unconditional promise, and is one strong point of difference from the cases relied" on by the respondent. It seems to me that when the defendant -signed this contract he simply agreed to reimburse the general agent for advance payment of premium, and that any person reading the instrument could well understand that its sole intent was to embody in writing the defendant’s future obligation under the contract with the agent, and that this obligation as in other executory contracts was dependent upon due performance by the other party.

The respondent claims that, even if the instrument was not negotiable, proof that the agent agreed to give the defendant a rebate of $234 would constitute no defense as between the original parties. At the time the letter was signed and the contract was made, rebating was forbidden under section 89 of the Insurance Law. That section did not in terms declare a contract for a rebate void, but the. act of giving rebates was made a misdemeanor by chapter 282 of the Laws of 1889, now section 1191 of the Penal Law, and the courts should not enforce a contract which is not only forbidden by the statute but which constitutes a penal offense. Section 89 does not, as claimed, provide a specific penalty for giving a rebate which should be considered exclusive; it simply provides the manner in which the Superintendent of Insurance may restrain future disobedience. The agent could not enforce the contract, and his assignee takes subject to all the defenses against him.

Judgment should be reversed and a new trial granted, with costs to appellant to abide the event.

Seabury and Gerard, JJ., concur.

Judgment reversed.  