#### Nathan Hutkoff, Henry S. Brightman and Isaac Hutkoff, Copartners, Doing Business Under the Firm Name of N. Hutkoff & Co., Appellants, *v.*Alfred Glazer, Respondent.

(Supreme Court, Appellate Term, First Department,

December, 1912.)

Payment — written assignment of note of third person construed as absolute promise to pay — negotiable instruments.

Where, after a sale of goods, the buyer assigns to the sellers the note of a third person by a special agreement in writing under which the sellers were given the right to collect the note at the buyer’s expense for the purpose of making payment of the biyrer’s indebtedness to them, accounting to the buyer for the amount received but stipulating that payment should not be complete until the note was collected, the buyer’s agreement to pay is absolute; and a claim that by said agreement the note was received as payment cannot be sustained.

Appeal by the plaintiffs from a judgment of the Municipal Court of the city of Hew York, borough of'Manhattan, sixth district, rendered in favor of the defendant.

Samuel A. Berger (Louis Cohn, of counsel), for appellants.

Boy, Watson & Haumer (Michael M. Helfgott, of counsel), for respondent.

Lehman, J.

The plaintiffs sold and delivered to the defendant goods of the value of $304.81. The defendant claims that he has paid for these goods. To establish the plea of payment the defendant shows that, after the sale, he assigned and transferred to the plaintiffs a note of a third party of the face value of over $500. The defendant, of course, does not dispute the rule that, in the absence of a special agreement, a note of a third party given for a precedent debt is presumed to be given as collateral security, and not in payment of the debt. He claims only that in this case the note was, by special agreement in writing, re*363ceived as payment. This, agreement is in evidence, and recites that, in consideration of a sale made on the first day of October, 1907, and in consideration of one dollar and other good and valuable considerations, the defendant assigns, sells, transfers and sets over to the plaintiffs all his right, title and interest to the note in question, to have and to hold by the said plaintiffs with the “ same rights as are presently vested in the said Alfred Glazer.” The agreement then continues as follows:

“ It is Further Understood and Agreed that the said note above referred to is hereby assigned by the said Alfred Glazer *for the purpose of making payment*unto FT. Hutkoff & Co. for the said merchandise heretofore bought by him of them, and which is more specifically referred to above.

“ It is Further Understood and Agreed that FT. Hutkoff *&*Co., after the institution of suit for the recovery upon said note, to turn over to Alfred Glazer any and all sums that they may obtain from the said makers or indorsers upon said note, which may be in addition or a surplus to the indebtedness of three hundred (300) dollars.

“All costs and disbursements of litigation, as well as attorneys fees, shall be paid by the said Alfred Glazer.”

The learned trial justice, after careful consideration, has decided that the agreement establishes that the note was received in payment of the prior indebtedness, and that the plaintiffs cannot recover upon this indebtedness, though they have reduced the note to judgment, and have unsuccessfully used all reasonable efforts to collect the judgment.

It seems to me that this interpretation of the agreement is incorrect, and that, in the absence of circumstances showing a contrary intent, it must be construed merely as an agreement for collateral security to which the plaintiffs were 'to resort to secure payment in the first instance. The agreement does not state that the note is assigned “ in payment,” but merely “ for the purpose of making payment,” and this clause is entirely consistent with the view that payment is to be made only from the proceeds of the note, and not by transfer of the note itself. This construction of the contract *364becomes clear from the following section, which provides that the surplus collected over the indebtedness must" he turned over to the defendant, and that the defendant shall pay the costs of litigation. It seems that the reasonable construction of the agreement is, that the defendant transferred to the plaintiffs a third party’s note, which they were to -have a right to collect at defendant’s expense for the purpose of making payment of : defendant’s indebtedness, accounting to him for the amoúu| received, but that payment should not be complete untik the amount of the indebtedness was actually collected on; the note. Any other construction would seem hard to reconcile with the agreement of defendant to pay the expenses of litigation; for this agreement to pay is in form absolute, and not merely to pay from a possible surplus.

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

Page and Hotchkiss, JJ., concur.

Judgment reversed and new trial ordered, with costs to appellants to abide event.