We seek to develop simultaneous segmentation and classification of notes from audio recordings in presence of outliers. The selected architecture for modeling time series is hierarchical linear dynamical system (HLDS). We propose a novel method for its parameter setting. HLDS can potentially be employed in two ways: 1) simultaneous segmentation and clustering for exploring data, i.e. finding unknown notes, 2) simultaneous segmentation and classification of audio recording for finding the notes of interest in the presence of outliers. We adapted HLDS for the second purpose since it is an easier task and still a challenging problem, e.g. in the field of bioacoustics. Each test clip has the same notes (but different instances) as of the training clip and also contain outlier notes. At test, it is automatically decided to which class of interest a note belongs to if any. Two applications of this work are to the fields of bioacoustics for detection of animal sounds in audio field recordings and also to musicology. Experiments have been conducted for segmentation and classification of both avian and musical notes from recorded audio.