Cengage Advantage Books: Law for Business 19th Edition by John Ashcroft,Katherine Ashcroft,Martha Patterson

Exercise 10

Houston Gold Exchange (Houston) purchased a purported Rolex watch from Shelly McKee, paying with a postdated check drawn on its bank. McKee endorsed the check to RR Maloan Investments, Inc. (Maloan), which cashed it prior to the issue date. The next day, Houston issued a stop-payment order on the check when it discovered information indicating that the watch was counterfeit. Maloan presented the check to Houston's bank, which refused to honor it based upon the stop-payment order. Maloan sued Houston. Was Maloan entitled to collect on the check due to its status as a holder in due course?