Requirements for HDC Status. In the fall of 1980, the Williams Brothers Asphalt Paving Co contracted with two local communities in Michigan to resurface some of their streets. During the course of the jobs, Williams incurred debts to its supplier, Rieth-Riley Construction Co, in the amount of 45,960. When the work was completed, Williams received a total of 188,433 from the two communities and deposited the funds into its checking account at First Security Bank. Although the amount owed to Rieth-Riley (45,960) was to have been set aside by the communities in a special trust (Michigan Builders Trust Fund), it was not. Williams owed a secured debt to First Security Bank and so immediately paid to the bank the entire amount it had received. The payment was in the form of checks drawn on Williams's checking account at the bank and made payable to the bank's order. Williams later filed for bankruptcy, and Rieth-Riley sought to get its money from the bank, contending that Williams Brothers had no right to the 45,960 still owed to Rieth-Riley and thus could not negotiate it to the bank (via the checks Williams Brothers had made payable to the bank). Is the bank a holder in due course in this instance?
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