First National Bank of Odessa v. Fazzari

John Wade, Jr., worked for Mike Fazzari (defendant). Wade and Fazzari had a meeting at Fazzari’s house. Though Fazzari could not read or write in English, Fazzari’s wife was able to do so, and she was in the next room during Wade and Fazzari’s meeting. Wade asked Fazzari to sign a paper and represented that the paper was a statement of wages for his income-tax return. Fazzari signed the paper based on Wade’s representation and did not ask his wife for any assistance in reading the paper. In reality, the paper was a promissory note in which Fazzari promised to pay $400 to Wade with interest. Fazzari discovered the true character of the paper he signed and consulted with an attorney, who advised Fazzari to tell all the banks in the area not to accept the note. At trial, the evidence established that Fazzari told a cashier at First National Bank of Odessa (Odessa Bank) (plaintiff) not to pay any money to Wade pursuant to the note because Wade had tricked him into signing the note. A few months later, the note was presented to Odessa Bank by a third party, who Wade indorsed the note over to. The cashier forgot about his conversation with Fazzari regarding the note. Consequently, Odessa Bank accepted the note, paid the $400 by cashier’s check, and forwarded the note to Wade’s bank, upon which the note was drawn for collection. Wade’s bank protested the note and forwarded the note to Odessa Bank. Accordingly, Odessa Bank sued Fazzari and sought a determination that Fazzari was liable for payment of the note. Fazzari argued that Odessa Bank was not a holder in due course because Odessa Bank had notice of problems with the note. Fazzari further argued that even if Odessa Bank was a holder in due course, these circumstances constituted fraud in the factum rendering the note void, which was a real defense.