The real question in this case is, whether the "White River Bank, by virtue of the transfer and delivery of the note of the defendant by Russell to them, under the circumstances stated in the case, acquired a legal right to hold the note, as against Russell himself.
The note at that time was a valid, negotiable note, with no pretence of any defence to it, even as against Russell, so that any transfer of the note that would be good as against Russell, would transfer a good title, and a right to recover against the defendant, and whether the transfer was for a valuable consideration or not, is not material, except in determining whether it was binding on Russell. A mere naked gift of a note to another, accompanied by. delivery, is good against the donor, and would enable the holder to recover of the maker, if he had no defence to it prior to the transfer, and the donor would have no more right afterward to accept payment of the note in discharge of it, than if he had sold it for value; see Milnes v. Dawson, 3 Law & Eq. 530.
There has been much discussion in the various courts of England and of this country, as to the effect of a transfer of a negotiable note or bill, while current, as collateral security merely, for a pre-existing debt in favor of the person thus receiving such bill or note against the party making the transfer, when such debt is not surrendered or discharged, whether such holder thus becomes a holder for value. But all those cases have been cases where the maker or acceptor of the note or bill, had at the time of such transfer, a valid defence to it against the party thus transferring it, and the question arose whether the holder by such transfer, acquired a right to enforce payment of the security when the party from whom he received it could not. In order to ena*393ble a party to recover upon a bill or note transferred to him, when the person from whom he received it could not, all the cases agree that he must be a holder for value, and without notice of the defence, and in order to make him a holder for value, he must have parted with some thing, or some right, upon the faith and credit of the security thus received.
There is a class of cases where the debt for which the bill or note was negotiated as collateral security, was created at the same time with the transfer of the paper, and in such cases, the fair and reasonable presumption is made, that the credit was given, or loan made, upon the security deposited ; see Palmer v. Richards, 1 Eng. L. & Eq. 529; Chicopee Bank v. Chapin, 8 Met. 40.
The case at bar falls exactly within this class of cases, and the bank thus became strictly a holder of the note for value, and entitled to recover upon it as such.
In Atkinson v. Brooks, 26 Vt. 569, a bill current on its face was transferred by a party having no right to collect it, as collateral security merely, for a debt previously existing against himself, which was not discharged or surrendered, and no express agreement made to forbear the collection of it, and it was held by the court that the party thus receiving the bill became a holder for value, so as to be entitled to recover it of the acceptor. * This was held upon the ground that from the mere acceptance of a bill or note payable at a future day, as collateral security, the law would imply an agreement by the creditor to forbear the collection of the principal debt, until such collateral security should become due, and that such implied agreement to forbear, formed such a new consideration as made the creditor a holder for value.
Whether that case stands upon any sound foundation, either in principle or by the adjudged cases, it does not now become necessary to decide.
The bank having thus acquired a valid title to the note as against Russell, and being a holder for value also, as we think, were not obliged to give the defendant any notice that they held the note, in order to protect themselves against a payment to Russell.
The argument of the defendant is based mainly upon the ground *394that this note had not been discounted by the bank, so that i£ the defendant had been summoned as Russell’s trustee, by any creditor of his, the defendant could have been held by such process, until notice from the bank to the defendant that they held the note.
It is not necessary to decide whether this note was protected against a trustee attachment before notice to the defendant by the bank, for if that were not so, we think it has no effect on the defendant’s liability in this suit. A negotiable note is liable to be attached by trustee process against the payee, even after a transfer by him, if no notice has been given to the maker, because the statute expressly so provides, and to that extent has created a restriction upon the effect of such negotiation by the law-merchant. By the act of 1798, any defence to any note or bill which the maker or acceptor might have as against the payee, before notice of the indorsement, might be set up in an action by the indorsee of the same.
This clog upon negotiable paper continued in force till 1836, when it was repealed. After this repeal, it was held that the law-merchant applied to the fullest extent to all negotiable paper, and that if the maker of a negotiable note was summoned as trustee of the payee, while the note was in the payee’s hands, still, if the note was not overdue the payee might transfer it, and that the holder would not be affected by the trustee attachment; see Hinsdell v. Safford et al., 11 Vt. 309; Little, Admr. v. Hale, Ib. 482; Hutchins v. Lyman and trustee, 13 Vt. 541. These decisions effectually prevented the attachment of current negotiable paper. This produced the statute of 1841, which provided that negotiable paper should be subject to attachment by trustee process, until notice of transfer should be given, and this act still continues to be the law, with the modification made in 1852, excepting from its operation such paper as shall be discounted at any bank.
But these acts had no effect as to payments, or any other defences to such paper. These are left to be governed by the general rules of mercantile law applicable to negotiable instruments.
It is said that it operates as a great hardship to the parties liable upon such obligations, because without notice they have no means of knowing when or to whom they should pay, and they are *395liable to suit -without any means of preventing it, and it is claimed that they ought to be permitted to presume that the paper has not been negotiated, if they have not been notified of it; but this inconvenience is just what every man must incur who sets afloat a negotiable note or bill; and if he is not willing to do'so, he must protect himself in advance by restraining its negotiability, and to hold that a payment before notice is a defence, would be to re-enact the act of 1798, which was long since repealed. In such a case, if the maker does not find his note in the hands of the payee when it falls due, he should presume, as the law presumes, that it has been transferred, and pay it when and where he finds it
The judgment below is affirmed.