#### Noetheield NatioNai, BaNK, Appellant, vs. Aendt and others, Respondents.

*May 6*

June *20, 1907.*

*Sale of stallion: Warranty of identity: Breach: Evidence: Bills and notes:*Bona fide *purchaser: Credit on hank account.*

.1. In an action upon a note given in part payment for a stallion purchased on the faith of a warranty and representations that he was a certain imported, thoroughbred, pedigreed, and registered stallion, proof of a discrepancy in marks and coloring between the stallion and the picture and description accompanying the pedigree delivered with him did not show such a breach of warranty as would constitute a defense to the note, the stallion having been received and retained with full opportunity for examination and ascertainment of the facts.

2. A bank purchased a note from depositors, placing the amount paid therefor to their credit on account subject to check. The balances on such account varied, and at times it was overdrawn, before the maturity of the note. Held,' that the fact that- at various dates, including the date of purchase and the date of maturity of the note, the amount to the credit of the sellers exceeded the amount due on the note, did not prevent the bank from being a *bona fide*purchaser for value.

Appeal from a judgment and an order of tbe municipal 'court for Marathon county: Louis Marcitetti, Judge.

*Reversed.*

This action was commenced September 5, 1905, to recover ■$666.67 and interest thereon from May 1, 1904, being the balance due on a note executed by the twelve defendants jVIareh 6, 1903, which became due May 1, 1905. At the close ■of the trial the court found as matters of fact, in effect, that -March 6, 1903, the defendants purchased of T. L. and J. L. Delancey a certain stallion for the agreed price of $2,400; 'that in consideration therefor the defendants executed and •delivered to the Delanceys three promissory notes, each dated March 6, 1903, for $800, payable to the said Delanceys, one of which was due May 1, 1904, another (the note in suit) *384May 1, 1905, and the other May 1, 1906; (4) that as part of said contract of sale the said Delanceys, in consideration of the same, then and there represented and warranted the said stallion to be a registered, thoroughbred, pedigreed stallion, and represented and warranted said stallion as being the Perdieron stallion Reveillon, No. 31,960 (45,505), imported from Erance; that the defendants herein relied upon said warranty and believed said representations to be true, and purchased said stallion and executed the said notes as aforesaid, and that said stallion was the only consideration for said notes; ' ( 5 ) that the said stallion was not the Percheron stallion Reveillon as warranted and represented; (6) that the defendants were induced by said false representations to execute and deliver said notes, and that said defendants did execute and deliver said notes in reliance upon said warranty and said representations; (I) that, by reason of said stallion not being thoroughbred, pedigreed, and registered as warranted and represented, the said stallion was worth not to exceed $300; (8) that the note of $800 due and payable May 1, 1904, was fully paid by the defendants; (9) that by reáson of said breach of warranty the consideration for the-promissory note upon which this action is brought has entirely failed; (10) that June 28, 1904, the plaintiff in this action discounted said note and gave credit in the sum of $650 upon the same to the said Delanceys upon their account with said plaintiff; that said Delanceys transacted business with the plaintiff and had an account with the plaintiff' since June, 1901, and had such, account with the plaintiff' December 14, 1905; (11) that June 28, 1904, when said note in suit was so discounted, said plaintiff was indebted to-said Delanceys in the sum of $907.38; that the following day said plaintiff was indebted to said Delanceys upon said account in the sum of $857.38; that April 20, 1905, said plaintiff was indebted to said Delanceys upon said account in the sum of $2,638.88; that May 1, 1905, the plaintiff was in-*385clebted to said Delanceys upon said account in tbe sum of $3,161.63; (12) that the plaintiff received said note in suit by mere credit wbieb continued to increase, and that the credit received by said Delanceys by reason of the discount of said note was not checked out before maturity of the note, and the credit given to said Delanceys on account of said note in said suit was not paid out by the plaintiff when this action was commenced; (13) that the plaintiff is not a *bona fide*purchaser of said note for value before maturity.

■ As conclusions of law the court found, in effect, that the plaintiff is not a *bona fide*purchaser of said note before maturity ; that the defendants are entitled to judgment that this action be dismissed, and for costs and disbursements of this action, and ordered judgment to be entered accordingly. Judgment was thereupon entered accordingly January 26, 1906.

Upon March 14, 1906, the plaintiff moved the trial court, upon the records and files thereof and the affidavits of the plaintiff’s attorney and the cashier of the plaintiff bank, to set aside said judgment and for a new trial, which motion was by order of the court dated March 19, 1906, and entered March 21, 1906, denied. From that order and said judgment the plaintiff appealed to this court April 19, 1906.

For the appellant there were briefs by *Brown, Pradt & Gewrich,*and oral argument by *F.*W. *Hall.*

For the respondents there was a brief by *Regner & Ringle,*and oral argument by *G. B. Bird.*

Cassoday, C. J.

1. The defense made to the note is that the defendants were induced to purchase the stallion for which the note and two others were given by false representations and warranties made to the defendants by the Delan-ceys, to whom the notes were made payable. Such representations and warranties were found by the court and are set forth in the foregoing statement. They are, in substance; *386wbat is contained in tbe “Certificate of Pedigree” issued by tbe “American Percberon Horse Breeders’ Association/’ and under tbe seal thereof, and dated at Chicago, December 2, 1902, being three months prior to tbe purchase of tbe stallion and tbe execution of tbe notes. That certificate was put in evidence by tbe defendants. There is no proof that tbe pedigree of tbe stallion was otherwise than therein stated. From tbe description therein and tbe picture of a, horse, constituting a part of tbe same, it appears that tbe stallion was black with a star on bis bead, and a white right bind foot or leg, whereas it appears from tbe undisputed evidence that tbe stallion in question bad no star on tbe bead and bad no white right bind foot or leg. And so tbe court finds that tbe stallion is not as warranted and represented. Obviously tbe question whether tbe stallion purchased was black, or bad a star on bis bead, or bad a white bind foot or leg, were ascertainable facts at tbe time of purchase. So whether tbe stallion was imported from France, or registered, or pedigreed, as stated, were all ascertainable facts, and hence provable at tbe time of tbe trial, which took place nearly three years after tbe purchase. It has long been regarded as tbe settled law of this state that “where tbe purchaser of goods, with full knowledge, or with full opportunity for examination and knowledge, of their defects, which are patent, and of tbe fact that tbe place of delivery is not that required by tbe contract, takes possession without notifying tbe vendor, at tbe time of receiving them or within a reasonable time thereafter, that they are not accepted as fulfilling tbe contract, be cannot recoup damages for such defects or failure in an action for tbe contract price.” *Locke v. Williamson,*40 Wis. 377; *McClure v.*Jefferson, 85 Wis. 208, 213, 54 N. W. 777; *J. Thompson Mfg. Co. v.*Gunderson, 106 Wis. 449, 453, 82 N. W. 299; *Kaiser v.*Nummerdor, 120 Wis. 234, 97 N. W. 932. But where tbe defects in tbe article purchased upon a warranty are not open and palpable, but are unknown to tbe *387purchaser when be received tbe same, tbe law is more liberal. *Morehouse v.*Comstock, 42 Wis. 626, 630; *Buffalo B. W. Co. v. Phillips,*67 Wis. 129, 132, 134, 30 N. W. 295; *Larson v. Aultman & T. Co.*86 Wis. 281, 288, 289, 56 N. W. 915. Under tbe authorities cited and tbe evidence in this case it is very certain that tbe defendants have no defense to tbe note based upon tbe difference in tbe color of tbe horse’s bead or bis feet, or other obvious departure from tbe de^-scription given, even as against tbe payees named therein. True, tbe court found that tbe horse was not tbe stallion as warranted and represented. But we find no evidence to sustain such finding except as mentioned. Assuming for tbe purposes of this case that there is evidence of some breach of warranty as to pedigree or some other latent defect in tbe stallion, still we would not be authorized to affirm this judgment.

2. Tbe trial court held that tbe plaintiff is not a *bona fide*purchaser of tbe note for value before maturity. This finding is challenged by tbe plaintiff. It is undisputed that tbe Delanceys, tbe payees of tbe three notes mentioned, kept an account with tbe plaintiff bank from June, 1901, to December 14, 1905, but they were not officers nor stockholders of the bank. It is undisputed that tbe first of tbe three notes became due May, 1, 1904, and was placed in tbe plaintiff bank as collateral and collected in full by tbe plaintiff on and before June 20, 1904, without any objection on tbe part of tbe defendants. Tbe principal sum mentioned in tbe note in suit did not become due until May 1, 1905; but $133.33 of tbe principal, besides interest, bad been paid thereon before June 28, 1904, on which day tbe plaintiff purchased that note for $650, and paid for tbe same by giving tbe De-lanceys credit upon their bank account for that amount. Prior to June 28, 1904, tbe plaintiff held tbe note in suit as collateral security to tbe Delanceys’ indebtedness to tbe bank, but after tbe payment of tbe first note of tbe series, June 20, *3881904, as mentioned, tbe plaintiff by its president on June 28, 1904, purchased tbe note in suit outright and paid for it as mentioned. That was nearly ten months before that note became due. At the time of such purchase the plaintiff had no knowledge of any defense to the note. The plaintiff first learned that the makers of this note claimed to have a defense to the same in August or September, 1905, some three or four months after the maturity of the note. It is claimed on the part of the defendants that because there was a balance to the credit of the Delanceys at the plaintiff bank of more than the amount of the note in suit on the respective dates— June 28, 1904, June 29, 1904, April 20, 1905, May, 1, 1905 — as found by the trial eourt, therefore the plaintiff did not purchase and pay for the note June 28, 1904. In other words, that the amount of the note stood to the credit of the Delanceys at the bank without being drawn out by them. But it is undisputed that.such balances were subject to cheek and simply stated the balances on the Delanceys’ account at the respective dates mentioned and had nothing to do with the note in suit, and that such balances varied from time to time and were at times .overdrawn. The facts stated make it certain not only that the plaintiff purchased the note and placed the amount thereof to the credit of the Delanceys in their bank account, less the discount, June 28, 1904, but also that the Delanceys drew out of the bank to their own use the whole of the amount so placed to their credit prior to the time when the plaintiff first learned that the defendants claimed to have a defense to the note. Such being the facts, there can be no question but that the plaintiff became the owner and holder of the note in due course and in good faith and for value before maturity, and hence is entitled to the protection of the law merchant, even if the defendants might have successfully defended against the vendors of the stallion. Secs. 1676 — 22, 1676 — 27, 1676 — 29, Stats. (Supp. 1906).

*389What bas been said mates i't unnecessary to consider tbe application to set aside tbe judgment.

*By the Court.*— Tbe order and judgment of tbe municipal court for Marathon, county are botb reversed, and tbe cause is remanded witb direction to enter judgment in favor of tbe plaintiff and against tbe defendants for the balance remaining unpaid upon tbe note in suit. ■