While employed as a night watchman 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 supermarkets in good faith promptly presented the six checks 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?