1. Why is the fake Rolex not an issue in determining HDC status?

2. What is the dissent’s concern about the decision?

On September 23, 2011, Houston Gold Exchange issued a $3,500 check as payor to Shelly McKee as payee to buy a purported Rolex watch from her. The check was postdated September 26, 2011. McKee properly endorsed the check and presented it to RR Maloan, which cashed the check for her on September 24, 2011. On September 24, 2011, Houston Gold Exchange issued a stop payment order on the check based on information that the watch was counterfeit. RR Maloan presented the check to Houston Gold Exchange’s bank for payment. Houston Gold Exchange’s bank refused to honor the check based on the stop payment order.

RR Maloan sued Houston Gold Exchange to collect on the check. RR Maloan maintained that it was a holder in due course entitled to collect on the check. Houston Gold Exchange was not present on the trial date, and the small claims court signed a default judgment in RR Maloan’s favor. On appeal, the trial court found for Houston Gold Exchange, and RR Maloan appealed.

JUDICIAL OPINION

BOYCE, Justice … The holder of a negotiable instrument is a holder in due course if the holder takes the instrument: (1) for value; (2) in good faith; and (3) without notice of any claim or defense to the instrument. At trial, Houston Gold Exchange argued that the check at issue was not a negotiable instrument because it was postdated. We reject this contention because the negotiability of a check is not affected by post-dating.

A holder is presumed to be a holder in due course unless there is evidence to the contrary. “A holder in due course takes the instrument free from all claims and all defenses of any party to the instrument with whom he has not dealt” unless a defense that bars recovery by a holder in due course applies. When the signatures on a check are admitted, as they are here, production of the check entitles the holder to recover on it unless the defendant establishes a defense.

Under section 3.302(a)(1), a holder of an instrument is a holder in due course if “the instrument when issued or negotiated to the holder does not bear such apparent evidence of forgery or alteration or is not otherwise so irregular or incomplete as to call into question its authenticity.” No evidence in this record suggests that the check was forged, altered, or not authentic.

There is no dispute on this record that RR Maloan took the check “for value” as required. With respect to good faith under section 1.201(b)(20), “good faith” is defined as “honesty in fact and the observance of reasonable commercial standards of fair dealing.” The record here conclusively establishes RR Maloan’s good faith as that concept is defined for these purposes in the statute. RR Maloan’s owner testified that the company is a check cashing business. The owner testified that an employee of RR Maloan took Houston Gold Exchange’s check from McKee in exchange for cash in the normal course of business. The owner testified that at the time the check was taken, he did not have knowledge that the purported Rolex watch was not authentic and did not have knowledge of any claims or defenses to the check. No evidence was presented that the owner or any employee of RR Maloan had knowledge at the time the check was accepted that the watch was not authentic………………………