
    The Third National Bank of Buffalo, Plaintiff, v. Hattie Bowman Spring, Defendant.
    (Supreme Court, Erie Trial Term,
    June, 1899.)
    1, Bills and notes — A note, which also provides for a conditional sale, is not a negotiable instrument.
    A contract, expressing a negotiable note, followed by a statement that the note is given for a piano the title of which shall remain in the payees until full payment of the note with interest, is not a negotiable instrument within the law merchant but is in effect an agreement for a conditional sale.
    8. Same — Transferee bound by payments made in good faith.
    Payments which the maker made in good faith to the payees after, but without notice of, the transfer of the contract are binding on the transferee.
    3. Same — Construction of conflicting provisions as to interest.
    Where the initial part of a contract especially provides for the payment of interest on a note therein expressed, and its last clause states that the “ note is to draw per cent, interest from date if not paid at maturity ”, interest will be allowed on the note from the date of the contract.
    This is an action to recover on a so-called promissory note. The evidence upon the trial was taken before the court and a jury, when by agreement of the parties the jury was discharged and the case submitted to the court upon the evidence taken, for its decision thereon.
    L. L. Lewis, Jr., for plaintiff.
    Geo. F. Thompson, for defendant.
   White, J.

On or about Hay 29, 1896, a copartnership firm known as Luxton & Black, was engaged in the business of buying and selling, or at any rate, in selling pianos in Buffalo. The defendant took from them a piano under an agreement by which he paid them $50 in cash, and executed and delivered to them an instrument in writing in the words and figures following, viz.:

“250.00 “ Buffalo, R. Y., 5/29/1896.
“ On or before one year after date I promise to pay to the order of Luxton & Black Two hundred and fifty dollars, payable at 418 Main St., value received with interest.
“ The makers and endorsers severally waive presentment for payment, protest and notice of protest and non-payment of this note. . Thé piano described herein for which this note is given shall remain- the property of Luxton & Black until their note is fully paid, and in no event shall the title of said piano rest in the said H. Bowman or her assigns until the entire amount for which this note is given together with the interest thereon is fully paid.
“ Ro person is authorized to receive a payment or make collections on this note unless the note is presented and the amount paid duly endorsed at the time. Ror is any agent allowed to extend the time of payment or renew said note. This note is to draw per cent, interest from date if- not paid at maturity.
“ Hattie Bowman,
“ Ro. 26082.
Address, Middleport, N. T."
“ Style H. Oak.”

Subsequently, and prior to August 6, 1896, Luxton & Black assigned and transferred said instrument to the plaintiff as collateral security for an indebtedness, which has not been paid. On August 6, 1896, and also on September 6, 1896, the defendant paid to Luxton & Black to apply upon said contract $50, believing at the time she made these payments that Luxton & Black still owned and held the contract and were entitled to receive them. On February 11, 1897, the plaintiff notified the defendant that it then owned the contract, and informed her that the $250 agreed by it to be paid, would become due May 29, 1897, or sooner, and requesting her to bring her receipts for any payments theretofore made by her. There is no direct evidence that the plaintiff knew or was informed when it took this assignment that the payments of August 6 and September 6, 1896, had been made. On May 29, 1897, the defendant paid to the plaintiff $150, claming that it was all that was due from her. The contract contains two inconsistent provisions concerning the payment of interest.

The first or so-called promissory note part of this contract contains an absolute agreement to pay interest, while the closing part of the agreement provides that interest shall be paid by her if the $250 is not paid on or before one year from the date thereof. The defendant, upon the trial, testified that no interest at all was to be paid. The inconsistent provisions of the contract itself and the testimony of the defendant upon this subject, might justify a refusal to allow interest prior to May 29, 1897, but I have concluded to allow interest from the date of the contract and for that amount the plaintiff is entitled to judgment. See Coleman v. Beach, 97 N. Y. 545; Woolsey v. Funke, 121 id. 87; Clark v. Woodruff, 83 id. 518.

The parties called the transaction indifferently a note ”, and a “ lease ”, but it was essentially and in fact a conditional sale of the piano, nothing more nor less, and the so-called promissory note part of the agreement was the covenant on the part of the defendant to pay the purchase price. Kitts v. Massasoit Ins. Co., 56 Barb. 177.

The legal effect of the transaction was simply an agreement for the purchase and sale of the piano. The title of the piano remained in Luxton & Black. By the assignment of the contract to the plaintiff, it succeeded to the right of Luxton & Black, namely, the ownership of the piano and the contract on the part of the defendant to pay for it. Such an instrument cannot be properly called a negotiable promissory note. It is much more than that in fact. It is evidence of title to personal property, conclusive as between the parties. Unless the payments made by the defendant in August and September, 1896, were valid as against the plaintiff, and under the ruling now made, until the interest is. actually paid by the defendant, the plaintiff is and will remain the owner of the piano. New York Security & Trust Co. v. Storm, 81 Hun, 33.

Such contractual provisions are inconsistent with and repugnant to the terms of a negotiable promissory note as defined by the law merchant.

The line of decisions, of which Mattison v. Marks, 31 Mich. 421; Ernst v. Steckman, 74 Penn. St. 13, and Ackley School Dist. v. Hall, 113 U. S. 135, are typical, do not in my judgment conflict with the view here expressed. There seems to be a clear distinction on principle between those cases and the one at bar.

The Negotiable Instruments Law, which was passed in Hay, 1897, wherein it provides that within that 'law an instrument “ is payable at a determinable future time which is expressed to be payable on or before a fixed or determinable future time specified therein ”; and that, “ an unqualified order or promise to pay is unconditional within the meaning of that act though coupled with a statement of the transaction which gives use to the instrument ”, has no application here.

It may be conceded that if the so-called promissory note part of the contract in question were cut out of or detached from the balance of the contract in question, it would in form be a good and valid negotiable promissory note within the law merchant. It is the balance of the instrument that makes it otherwise, showing as it does that the entire instrument as contradistinguished from such a negotiable promissory note it is in fact a conditional contract for the purchase and sale of a piano, fixing the,ownership in one of the parties and giving the other the right to acquire it by performing certain conditions precedent.

The instrument provides, among other things, that no person shall have the right to receive payments upon it unless it is presented and the payments are indorsed at the time they are made. This was intended no doubt for the protection of the vendors against unauthorized acts of agents, and in no event can the plaintiff here claim an advantage from a nonobservance of that provision by Luxton & Black, because the only rights it has are those derived from them. This is true unless the defendant was bound to know when she paid the $100 to Luxton & Black that they had already assigned the contract to the plaintiff.

The contract being a mere chose in action and in no sense a negotiable promissory note, and those payments having been made by the defendant in good faith in the belief that Luxton & Black had the right to the money and without notice that they had assigned to the plaintiff, were valid payments by her upon the contract and the plaintiff is bound by them. Van Keuren v. Corkins 66 N. Y. 77; Trustees of Union College v. Wheeler, 61 id. 88.

Special legislation imposing restrictions and conditions upon the right to make, use and take negotiable promissory notes in certain commercial and trade transactions; .placing upon such paper danger marks, so to speak, as a warning and protection to the unwary against fraud; and the wisdom of maintaining the law merchant in its integrity, all indicate the necessity for such constructions of that law by the courts as will so far as possible prevent confusing innovations and keep the law what it has been for ages, the basis of an inestimable circulating credit like the currency of the country.

Ko controlling authority against the views here expressed has been called to my attention .by counsel, although able and instructive briefs from both sides are before me.

I am of the opinion that the contract between the defendant and Luxton ■& Black is not a negotiable promissory note within the law merchant; that the payments made by the defendant in August and September, 1896, were good and valid and are binding upon the plaintiff; that the plaintiff is entitled to judgment for the amount of the interest upon the $250 to be computed according to the rule applicable to partial payments in such cases.

Ordered accordingly.  