What are the Bank’s rights, if any, against the supermarkets? You may assume that the supermarkets cashed all of the checks in good faith.

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What are the Bank’s rights, if any, against the supermarkets? You may assume that the supermarkets cashed all of the checks in good faith.

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While employed as a night security guard at the place of business of A. B. Cate Trucking Company, Fred Fain observed that the office safe had been left unlocked. It contained fifty payroll checks, which were ready for distribution to employees two days later. The checks had all been signed by the sole proprietor, Cate. Fain removed five of these checks and two blank checks that were also in the safe. Fain forged the indorsements of the payees on the five payroll checks and cashed them at local supermarkets. He then filled out one of the blank checks, making himself payee, and forged Cate’s signature as drawer. After cashing that check at a supermarket, Fain departed by airplane to Jamaica. The six checks were promptly presented for payment to the drawee bank, the Bank of Emanon, which paid each one. Shortly thereafter, Cate learned about the missing payroll checks and forgeries and demanded that the Bank of Emanon credit his account with the amount of the six checks. Must the Bank comply with Cate’s demand? What are the Bank’s rights, if any, against the supermarkets? You may assume that the supermarkets cashed all of the checks in good faith.

Explanation & AnswerSolution by a verified expert

Explanation

The bank must prove that Individual C is negligent and does not keep the checks safe, in order to get away with the liability of paying the amount on the checks to Individual C; otherwise, the bank is going to have to pay the full amount to Individual C.
The bank can claim the amount of loss from the store for five checks. The checks are to be paid to the employees of Individual C since it is a breach of contract on the part of the store; the store gave the payment to Individual F, who has forged the checks and falsely represented the bank.
Individual F has also represented a check having the forged signature of Individual C and the store is not responsible for the forged signature. The bank cannot claim the amount from the store for a check having a forged signature.

Sample Response

The bank is going to be liable to Individual C for the payment if it fails to prove that Individual C is negligent in taking care of the checks.
The bank can claim the loss suffered from the store, on account of the forged checks but it cannot claim the losses suffered due to the check that was falsely signed by Individual F.

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