Allen, J.
State bonds, and bonds of municipal and other corporations, are negotiable securities, and pass by indorsement, or delivery, like negotiable promissory notes or bank notes, unless by special provisions on their face, or by legislative acts authorizing their issue, such transfer is restricted or prohibited.
Mercer Co.
v.
Hacket,
1 Wall. 83;
Murray
v.
Lardner,
2 Wall. 110. The bonds in question are of this character, and there is nothing on their face, so far as the case shows, nor in the law (c. 3, Laws of 1871) authorizing their issue, restricting in any way their negotiability.
The holder of a bill, note, or bond, payable to bearer, like the bonds in this case, or of a negotiable note endorsed in blank, who obtained it before due, for value, in the usual course of business, in good faith, and without notice of any defence or defect in the title, has a good title. This elementary principle of commercial law prevails in every jurisdiction where commercial business is transacted, and is founded in the policy of sustaining the credit and circulation of negotiable paper. Freedom and safety in the negotiation of such paper are a practical necessity, and require that the innocent holder for value be protected against a defective title; and no difference must be made whether he received it from one who obtained it honestly, or by fraud, finding, or theft. Questions of the meaning and application of the rule are made ; but the rule itself is universal and unquestioned, and to it there is no more exception in New Hampshire than anywhere else.
Miller
v.
Race,
1 Burr. 452;
Peacock
v.
Rhodes,
2 Doug. 633;
Murray
v.
Lardner,
2 Wall. 110;
Emerson
v.
Crocker,
5 N. H. 159;
Clark
v.
Pease,
41 N. H. 421, 424. The rule, that where one of two innocent persons must suffer, the loss should fall upon him who has suffered a negotiable security, with his name attached to it, to get into circulation, and thereby mislead the indorsee, has always been applied with special force to cases of this kind.
The peculiar doctrine, as expressed in
Jenness
v.
Bean,
10 N. H. 266, and
Williams
v.
Little,
11 N. H. 66, and on which the plaintiff in this case relies, that negotiable paper, pledged to the holder as collateral security, is not, in the hands of an innocent pledgee, exonerated from defences or defective title, is not recognized outside of
New Hampshire, and within this state has been so limited as not to include cases like the one under consideration. In
Clement
v.
Lever
ett, 12 N. H. 317, an agent of the defendants, intrusted by them with bills drawn by him payable to his own order, and by them accepted to enable him to raise money for them, pledged the bills to a
bona fide
holder to secure money borrowed for Ms own use. It was held, that the defendants, having enabled their agent to hold himself out as owner, were bound by the pledge, and liable to the pledgee. Parker, C. J., delivering the opinion, says, of
Jenness
v.
Bean
and
Williams
v. Little, that the court advanced the doctrine of those cases because the general ownership or property of the bill or note pledged as collateral security remained in the indorser. “ But,” he remarks, “ there is another principle, of earlier application, and of paramount influence in this case
[Clement
v. Leverett]. The defendants intrusted Burley (their agent) with these bills, accepted by them, and thereby enabled him to hold himself out as the owner of them. * * Assuming that Burley abused the confidence reposed in him, the defendants who intrusted him with these negotiable evidences of debts against themselves must bear the loss. * * * The plaintiff is a
bona fide
holder without notice.”
Numerous authorities are cited by Judge Parker, which abundantly sustain the doctrine of
Clement
v.
Leverett. Collins
v.
Martin,
1 B.
&
P. 648, is where the plaintiff had deposited two bills of exchange, endorsed in blank (and so in all legal respects like the plaintiff’s two bonds in this case), with his banker, for collection when due. The banker pledged them to the defendant to secure a loan of money to himself. The plaintiff brought trover against the pledgee, and was nonsuited. The plaintiff set up the distinction, which is set up in this case, between a pledge and a sale. But it was held, that the breach of confidence in the agent would be as great in a pledge as in a sale; that in either case the loss would fall on the plaintiff, who, by putting-such negotiable paper into the hands of his banker for collection, enabled him to pledge them to an innocent holder; and that, as between the two innocent parties, the plaintiff must suffer. Upon that principle, it would be immaterial whether the paper was committed to the agent for collection, or for safe-keeping. For, between keeping and collecting there is no distinction that can make the plaintiff the loser in the latter case, and the pledgee the loser in the former. Judge Parker, citing this case as an authority for the decision in
Clement
v.
Leverett,
shows that the infirmity of collateral security, which he introduced in
Jenness
v.
Bean
and
Williams
v.
Little,
does not affect the title of an innocent pledgee, loaning money upon negotiable paper received from an agent, entrusted by the maker or owner with the possession of it for one purpose, and thus enabled to use it for another purpose, leaving one of two innocent persons to suffer a loss.
Washington Bank
v.
Lewis,
22 Pick. 24, Story on Agency,
ss.
227, 228,
Bank
v.
Kortright,
22 Wend. 348, 358, 361,
Bank
v.
Plimpton,
17 Pick. 159, are all cited by Judge Parker in
Clement
v.
Leverett,
in point and in the same line with
Collins
v.
Martin.
No authorities have been found which hold to a contrary doctrine. The question has been raised, whether a person receiving paper as collateral security for a debt previously existing, and advancing for it at the time no consideration either in the way of a loan of money or extension of forbearance, is a holder for value, within the meaning of that phrase as used in commercial law. The affirmative is held in
Homes
v. Smyth, 16 Me. 177, 180;
Bramhall
v. Beckett, 31 Me. 205;
Nutter
v. Stover, 48 Me. 163, 169;
Bay
v.
Coddington,
5 Johns. Ch. 54;
Stalker
v.
M’Donald,
6 Hill 93.
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Allen, J.
State bonds, and bonds of municipal and other corporations, are negotiable securities, and pass by indorsement, or delivery, like negotiable promissory notes or bank notes, unless by special provisions on their face, or by legislative acts authorizing their issue, such transfer is restricted or prohibited.
Mercer Co.
v.
Hacket,
1 Wall. 83;
Murray
v.
Lardner,
2 Wall. 110. The bonds in question are of this character, and there is nothing on their face, so far as the case shows, nor in the law (c. 3, Laws of 1871) authorizing their issue, restricting in any way their negotiability.
The holder of a bill, note, or bond, payable to bearer, like the bonds in this case, or of a negotiable note endorsed in blank, who obtained it before due, for value, in the usual course of business, in good faith, and without notice of any defence or defect in the title, has a good title. This elementary principle of commercial law prevails in every jurisdiction where commercial business is transacted, and is founded in the policy of sustaining the credit and circulation of negotiable paper. Freedom and safety in the negotiation of such paper are a practical necessity, and require that the innocent holder for value be protected against a defective title; and no difference must be made whether he received it from one who obtained it honestly, or by fraud, finding, or theft. Questions of the meaning and application of the rule are made ; but the rule itself is universal and unquestioned, and to it there is no more exception in New Hampshire than anywhere else.
Miller
v.
Race,
1 Burr. 452;
Peacock
v.
Rhodes,
2 Doug. 633;
Murray
v.
Lardner,
2 Wall. 110;
Emerson
v.
Crocker,
5 N. H. 159;
Clark
v.
Pease,
41 N. H. 421, 424. The rule, that where one of two innocent persons must suffer, the loss should fall upon him who has suffered a negotiable security, with his name attached to it, to get into circulation, and thereby mislead the indorsee, has always been applied with special force to cases of this kind.
The peculiar doctrine, as expressed in
Jenness
v.
Bean,
10 N. H. 266, and
Williams
v.
Little,
11 N. H. 66, and on which the plaintiff in this case relies, that negotiable paper, pledged to the holder as collateral security, is not, in the hands of an innocent pledgee, exonerated from defences or defective title, is not recognized outside of
New Hampshire, and within this state has been so limited as not to include cases like the one under consideration. In
Clement
v.
Lever
ett, 12 N. H. 317, an agent of the defendants, intrusted by them with bills drawn by him payable to his own order, and by them accepted to enable him to raise money for them, pledged the bills to a
bona fide
holder to secure money borrowed for Ms own use. It was held, that the defendants, having enabled their agent to hold himself out as owner, were bound by the pledge, and liable to the pledgee. Parker, C. J., delivering the opinion, says, of
Jenness
v.
Bean
and
Williams
v. Little, that the court advanced the doctrine of those cases because the general ownership or property of the bill or note pledged as collateral security remained in the indorser. “ But,” he remarks, “ there is another principle, of earlier application, and of paramount influence in this case
[Clement
v. Leverett]. The defendants intrusted Burley (their agent) with these bills, accepted by them, and thereby enabled him to hold himself out as the owner of them. * * Assuming that Burley abused the confidence reposed in him, the defendants who intrusted him with these negotiable evidences of debts against themselves must bear the loss. * * * The plaintiff is a
bona fide
holder without notice.”
Numerous authorities are cited by Judge Parker, which abundantly sustain the doctrine of
Clement
v.
Leverett. Collins
v.
Martin,
1 B.
&
P. 648, is where the plaintiff had deposited two bills of exchange, endorsed in blank (and so in all legal respects like the plaintiff’s two bonds in this case), with his banker, for collection when due. The banker pledged them to the defendant to secure a loan of money to himself. The plaintiff brought trover against the pledgee, and was nonsuited. The plaintiff set up the distinction, which is set up in this case, between a pledge and a sale. But it was held, that the breach of confidence in the agent would be as great in a pledge as in a sale; that in either case the loss would fall on the plaintiff, who, by putting-such negotiable paper into the hands of his banker for collection, enabled him to pledge them to an innocent holder; and that, as between the two innocent parties, the plaintiff must suffer. Upon that principle, it would be immaterial whether the paper was committed to the agent for collection, or for safe-keeping. For, between keeping and collecting there is no distinction that can make the plaintiff the loser in the latter case, and the pledgee the loser in the former. Judge Parker, citing this case as an authority for the decision in
Clement
v.
Leverett,
shows that the infirmity of collateral security, which he introduced in
Jenness
v.
Bean
and
Williams
v.
Little,
does not affect the title of an innocent pledgee, loaning money upon negotiable paper received from an agent, entrusted by the maker or owner with the possession of it for one purpose, and thus enabled to use it for another purpose, leaving one of two innocent persons to suffer a loss.
Washington Bank
v.
Lewis,
22 Pick. 24, Story on Agency,
ss.
227, 228,
Bank
v.
Kortright,
22 Wend. 348, 358, 361,
Bank
v.
Plimpton,
17 Pick. 159, are all cited by Judge Parker in
Clement
v.
Leverett,
in point and in the same line with
Collins
v.
Martin.
No authorities have been found which hold to a contrary doctrine. The question has been raised, whether a person receiving paper as collateral security for a debt previously existing, and advancing for it at the time no consideration either in the way of a loan of money or extension of forbearance, is a holder for value, within the meaning of that phrase as used in commercial law. The affirmative is held in
Homes
v. Smyth, 16 Me. 177, 180;
Bramhall
v. Beckett, 31 Me. 205;
Nutter
v. Stover, 48 Me. 163, 169;
Bay
v.
Coddington,
5 Johns. Ch. 54;
Stalker
v.
M’Donald,
6 Hill 93. But where the owner of negotiable paper has, for a certain purpose, entrusted it to the care and possession of an agent selected by himself, and that agent, in breach of his trust, has transferred the paper as collateral security for a loan made to him upon the faith of that security, and the innocent owner or the innocent pledgee must suffer a loss from such breach of trust in the owner’s agent, the loss falls on the principal whose agent caused the loss. And it is not believed that any contrary doctrine has ever anywhere been judicially expressed.
Whether a deposit for safe-keeping comes within the general rule of agency, which holds a principal bound by an act which he has enabled his agent to perform, we need not here inquire. It is enough that the anomalous infirmity of collateral security, asserted in the New Hampshire cases, has never been held to extend to such a case as this. That infirmity, applied in this case, would affect nothing but the right of the defendants to collect these bonds when duo • of the state that issued them. It would merely enable the state to set up against the defendants any defence which it might have had against the plaintiff, if she had not lost them, and had called on the state to pay them. It is a New Hampshire idiosyncrasy, rejected by the rest of the world, and will not be followed beyond the limit fixed by the cases asserting it.
Swift
v.
Tyson,
16 Pet. 1;
Goodman
v.
Simonds,
20 How. 343;
Murray
v.
Lardner,
2 Wall. 110;
Hotchkiss
v.
Nat. Banks,
21 Wall. 354; 3 Kent Com. 81, n. 1 (12th ed.); Redfield
&
Bigelow Leading Cases on Bills and Notes 195;
Wheeler
v.
Guild,
20 Pick. 545;
Gardner
v.
Gager,
1 Allen 502;
Atkinson
v.
Brooks,
26 Vt. 569;
Trs. of Iowa College
v.
Hill,
1 Am. L. Reg., N. S., 745 ; 1 Parsons Notes and Bills 219, 228.
Judgment for the defendants.
Foster and Stanley, JJ., did not sit.