Scott, J.,
delivered the opinion of the court. •
In the argument of this cause, it was contended by the plaintiffs counsel, that the note, in which this controversy had its origin, was not negotiable, within the meaning of the statute relative to bills of exchange and negotiable promissor notes; and therefore, that the principles of law, asserted in the several instructions given by the court, were inapplicable. The term “negotiable,” in its enlarged signification, applies to any written security which may be transferred by endorsement or delivery, so as to vest in the endorsee the legal title, so as to enable him to maintain a suit thereon, in his own name. In this sense of the term, a bond, under the statute concerning bonds and notes, may be said to be negotiable, and in this sense is the term understood when applied to paper in cases similar to that now under consideration. -In this State, where there exists both bonds and promissory notes which are negotiable, but yet have none of the properties of a bill of exchange, but their being sueable upon in the name of the endorsee and-notes with all the characteristics of a bill of exchange, the term assignable is usually applied to the former, and negotiable to the latter class of those instruments.
The note, the proceeds of which are the subject of this suit, although made in New York, as it appears from its face, is payable here, and will look to the laws of this State for the ascertaining of its nature and properties. Although it is not negotiable, in one sense of the term, yet it is in the sense which will enable a bona Ifde holder, for valuable consideration, to retain it or its proceeds against all claims of the payee. The holder of negotiable paper, who will put his name upon it and thereby give it currency, although he may place it in the hands of an agent, and without consideration, 'yet, cannot reclaim it from a holder who is *343found in possession of it or its proceeds — who has paid value for it. The maxim, that where one of two innocent persons must sustain a loss by the act of another, it shall fall upon him who put it into the power of the third person to do the act occasioning the loss, is applicable here. The rule, that the bona fide holder of negotiable paper for value shall retain it or its proceeds against the payee, is generally admitted. In its application, however, a difficulty has arisen, as to what is a valuable consideration. If the holder has a pre-existent debt against the person from whom he receives it, it has been questioned, whether the mere application of the proceeds to the extinguishment of the debt or placing them to the credit of the person from whom it is received, will deprive the payee of his right to pursue the money in the hands of the holder. It is said that there must be an advance of money or a giving of new credit on the faith of the paper, otherwise the holder has sustained no injury. In the case of Clark vs. Loker, 11 Mo. 97" court="Mo." date_filed="1847-10-15" href="https://app.midpage.ai/document/clark-v-loker-6612226?utm_source=webapp" opinion_id="6612226">11 Mo. Rep. 97, it was holden, that a creditor, to whom there was a transfer in good faith, of depreciated bank paper, in payment of a debt by an agent, to whom it had been entrusted, would hold the paper, unaffected by the claim of the principal. The case of the bank of the Metropolis against the New England bank, 6 Peters 227, has carried the doctrine of the protection of bona fide holders of negotiable paper against the payee, as far as is warranted by authorities, and to an extent not sustained by the decisions of some courts. One of the instructions, asked by the plaintiff, was nearly in the language of the court in that case. The instructions given by the court, at the instance of the defendants, was more liberal to the defendants than any case will warrant. Every presumption is in favor of the holders of negotiable paper; bona fide and for a valuable consideration, and he who would reclaim its proceeds, must show the facts which would entitle him to the relief he seeks. It is said, that the payment ef a pre-existing debt, or placing the proceeds of a note to the credit of him from whom it is received, leaves the holder in the same situation that he was in before he took the paper, in the event ot his being compelled to restore the proceeds, and therefore he is not injured. In the case above referred to, of the bank of the Metropolis vs. the New England bank, 1 Howard 238" court="Miss." date_filed="1872-07-01" href="https://app.midpage.ai/document/shaffer-v-state-7998246?utm_source=webapp" opinion_id="7998246">1 Howard 238, it is maintained, that the difference in principle is not perceived, between an advance of money and a balance suffered to remain upon the faith of these mutual dealings. In the one case, as well as in the other, credit is given upon the paper deposited or expected to be transmitted in the usual course of the transactions between the parties. If the parties appeared to be, and treated eacli other as the true owners of the paper mutually remitted; and had no *344notice to the contrary, and that balances were, from time to time, suffered to remain in the hands of each other, to be met by the proceeds of negotiable paper, deposited or expected to be transmitted in the usual course of dealing between them, then the holder is entitled to retain for the amount due on the settlement of the account. This authority does not go to the extent, that the mere placing the proceeds to the credit of the person from whom the paper was received and against whom there is a balance, will avail the holder as a defence. It must appear, that credit was given on the faith that such remittances would from time to time be made.
Judge Ryland concurring, the judgment will be reversed and the cause remanded.