CITY NATIONAL BANK v. CROCKER NATIONAL BANK

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Court of Appeal, Second District, Division 5, California.

CITY NATIONAL BANK, a national banking association, Plaintiff and Appellant, v. CROCKER NATIONAL BANK, a national banking association, Defendant and Respondent.

Civ. 68192.

Decided: December 29, 1983

Sedgwick, Detert, Moran & Arnold, Lane J. Ashley, San Francisco, and David M. Humiston, Los Angeles, for plaintiff and appellant. Munger, Tolles & Rickershauser and Ronald K. Meyer, Los Angeles, for defendant and respondent.

City National Bank, plaintiff and appellant (hereinafter City National), appeals an order dismissing its third amended complaint after the sustaining of a general demurrer.   At issue is whether City National properly stated a cause of action for negligence or money paid by mistake after four attempts.   We find it has, and reverse the order of dismissal accordingly.

The instant action arises out of a series of bank transactions in which defendant and respondent Crocker National Bank (hereinafter Crocker) was presented with authorized, but misappropriated, cashier's checks, made payable to Crocker, by a third party seeking to negotiate the checks for his own benefit.

During the period from December 5, 1978, through March 9, 1979, City National, by and through its employee, Michael Kelly, issued eight cashier's checks, payable to Crocker and totaling $125,000.   The checks ranged in amounts of $5,000 to $40,000.   One Richard Warren, who maintained an ordinary customer account at Crocker, received the City National checks without authorization from Kelly, and deposited same into his (Warren's) Crocker bank account without authorization.   Crocker negotiated the checks without inquiring of City National as to the authority of Warren to divert the funds for his own benefit.   City National, however, paid each of its eight cashier's checks upon presentation by Crocker.   Approximately nine months after City National paid the last of its cashier's checks, it filed this action against Crocker to recover the funds paid.

City National's original complaint was premised on causes of action for money paid by mistake, breach of warranty, negligent misrepresentation, and negligence.1

Crocker demurred and the demurrer was sustained with leave to amend.

City National then filed its first amended complaint for damages against Crocker deleting the causes of action for breach of warranty and negligent representation, and alleging causes of action for negligence and recovery of money paid by mistake.   The first amended complaint differed from the original complaint in that the original complaint alleged a duty on the part of Crocker to inquire as to the validity of the various checks, whereas the first amended complaint alleged a duty upon Crocker to inquire as to the validity of the transactions and the proper handling of the cashier's checks made payable to Crocker where a third party sought to negotiate the checks for his own benefit.

Crocker again demurred to the first amended complaint.   However, the demurrer was overruled.   Thereafter, Crocker answered the complaint and filed a motion for judgment on the pleadings based on the same grounds as its demurrer to the first amended complaint.   Crocker's motion for judgment on the pleadings was granted with leave to amend.

Subsequently, City National filed its second amended complaint containing additional allegations supporting causes of action for negligence and recovery of money paid by mistake.   Crocker again demurred and the demurrer was sustained with leave to amend.

City National filed its third amended complaint alleging causes of action for negligence, recovery of money paid by mistake, and the additional allegation that Crocker violated its own standard operating procedures.

Crocker again demurred, and this time the court sustained the demurrer without leave to amend.   The court concluded that no legal duty of inquiry existed on the part of Crocker since cashier's checks and not regular checks were used in the transaction.

The court entered its order of dismissal of City National's third amended complaint as well as its entire action.   City National then timely filed this appeal.

Among the issues presented is whether a legal duty exists on the part of Crocker to make a reasonable inquiry into the propriety of a transaction involving cashier's checks made payable to a bank but presented by a third party under circumstances indicating fraud or misappropriation;  whether an adequate allegation was set forth showing a breach of that duty by Crocker;  whether City National's complaint states a cause of action for recovery of money paid by mistake;  and whether the “final payment” provision of Commercial Code section 4213 bars City National from recovering from Crocker the amount of checks paid by City National due to the negligence of Crocker.

 In its first cause of action of its third amended complaint, City National alleges that Crocker is liable for negligently allowing Warren to deposit eight City National cashier's checks worth $125,000 into his own Crocker account, and in presenting each check to City National for payment without first making an inquiry into the propriety of the transaction.

For City National to adequately state a cause of action in negligence, it must establish that Crocker owed a duty to inquire of City National as to whether Warren could negotiate the City National cashier's checks made payable to Crocker.  (Joffe v. United California Bank (1983) 141 Cal.App.3d 541, 555, 190 Cal.Rptr. 443;  see also Sun 'N Sand, Inc. v. United California Bank (1978) 21 Cal.3d 671, 693, 148 Cal.Rptr. 329, 582 P.2d 920.)   Several factors must be taken into consideration before the imposition of a duty to exercise reasonable care will be made.  (Sun 'N Sand, Inc. v. United California Bank, supra, 21 Cal.3d at p. 695, 148 Cal.Rptr. 329, 582 P.2d 920.)   Among those factors are “ ‘․ the foreseeability of harm to the plaintiff, the degree of certainty that the plaintiff suffered injury, the closeness of the connection between the defendant's conduct and the injury suffered, the moral blame attached to the defendant's conduct, the policy of preventing future harm, the extent of the burden to the defendant and consequences to the community of imposing a duty to exercise care with resulting liability for breach, and the availability, cost, and prevalence of insurance for the risk involved.’ ”   (Ibid., quoting from Rowland v. Christian (1968) 69 Cal.2d 108, 113, 70 Cal.Rptr. 97, 443 P.2d 561.)   Of primary concern in determining whether a defendant owes such a duty to the plaintiff is the foreseeability of the risk.  (Ibid.;  see also Joffe v. United California Bank, supra, 141 Cal.App.3d at p. 556, 190 Cal.Rptr. 443.)   The duty, however, is narrow in scope.

“ ‘[I]t is activated only when checks, not insignificant in amount, are drawn payable to the order of a bank and are presented to the payee bank by a third party seeking to negotiate the checks for his [or her] own benefit.   Moreover, the bank's obligation is minimal․ the bank may not ignore the danger signals inherent in such an attempted negotiation.   There must be objective indicia from which the bank could reasonably conclude that the party presenting the check is authorized to transact in the manner proposed.   In the absence of such indicia the bank pays at its peril.’ ”  (Joffe v. United California Bank, supra, 141 Cal.App.3d at p. 556, 190 Cal.Rptr. 443, quoting from Sun 'N Sand, Inc. v. United California Bank, supra, 21 Cal.3d at pp. 695–696, 148 Cal.Rptr. 329, 582 P.2d 920.)

In the instant matter, eight checks, either in the aggregate or individually, were issued for substantial amounts.   Each was made payable to Crocker with no indicia on the face of the checks (as pleaded) that Warren had express or implied authorization from City National to negotiate the instruments.  (See E.F. Hutton & Co., Inc. v. City National Bank (1983) 149 Cal.App.3d 60, 196 Cal.Rptr. 614.)   We conclude that Crocker should have appreciated the indicia of the misappropriation and that City National's loss was reasonably foreseeable.

City National relies substantially on Sun 'N Sand, Inc. v. United California Bank, supra, 21 Cal.3d 671, 148 Cal.Rptr. 329, 582 P.2d 920 in support of its contention that it has stated sufficient facts to withstand a demurrer.

In Sun 'N Sand, an employee of the corporation, as a duty of her employment, prepared checks for signature by a corporate officer.   Over a three-year period, nine checks were made payable to United California Bank (UCB) for different but relatively small amounts.   The employee then obtained the authorized signatures from a corporate officer who believed the checks were being issued for payment of a debt owed to UCB.   In fact, no such debts were owed to UCB.   The employee then altered the checks, increasing the amounts of each check by several thousand dollars, and presented them to UCB.   Notwithstanding the fact that UCB was the named payee, it allowed the proceeds of the checks to be deposited in the personal account of the employee.   UCB then presented each of the checks to Union Bank, where Sun 'N Sand maintained its company account, for payment.   Union Bank paid the amounts and charged Sun 'N Sand's account for the face amount.

In reversing the lower court's judgment (order of dismissal), the Supreme Court concluded that the circumstances were “sufficiently suspicious that UCB should have been alerted to the risk that Sun 'N Sand's employee was perpetrating a fraud.”  (Id., at pp. 694–695, 148 Cal.Rptr. 329, 582 P.2d 920.)   The court determined that “By making reasonable inquiries, UCB could have discovered the fraudulent scheme and prevented its success.”  (Ibid.)  Therefore, a duty of inquiry did exist and the court found that the allegation stated a cause of action for negligence.  (Id., at p. 703, 148 Cal.Rptr. 329, 582 P.2d 920.)   However, it was very careful to limit the circumstances upon which such a duty to make inquiry arises.

Crocker factually distinguishes Sun 'N Sand by noting that Sun 'N Sand involved the corporate checks of a private business, whereas the present action involves City National's own cashier's checks.   It also seeks to exploit the narrowly circumscribed duty and minimal obligations prescribed therein by arguing that City National's cashier's checks provided objective indicia from which it could reasonably conclude that Warren was authorized to negotiate the checks.   The argument continues that since a cashier's check is a representation by the issuing bank to other banks or third parties that it holds funds on deposit to satisfy the obligation, it removes from issue the question of the creditworthiness of the bearer and places it instead on the issuing bank.

Two problems exist with Crocker's argument.   First, it is true that a cashier's check presumably issued for value is a bank's primary obligation.   Likewise, there is little argument that the presumption of validity cannot be overcome by evidence that the bank failed to receive consideration for the check from the payee.  (Kaufman v. Chase Manhattan Bank, National Ass'n. (S.D.N.Y.1973) 370 F.Supp. 276, 278.)   However, in the instant case, the validity of the checks is not in question.   It is the validity of the transactions that should have produced the inquiry.   Alternatively stated, it was the authority of Warren to negotiate for his own benefit City National's cashier's checks, made payable not to him but to Crocker, that should have caused Crocker concern.   Such an inquiry directly comports with Sun 'N Sand' s conclusion that “There must be objective indicia from which the bank could reasonably conclude that the party presenting the check is authorized to transact in the manner proposed.”  (Sun 'N Sand, Inc. v. United California Bank, supra, 21 Cal.3d at pp. 695–696, 148 Cal.Rptr. 329, 582 P.2d 920;  emphasis added.)

Secondly, the language of Sun 'N Sand in and of itself does not limit the duty of inquiry as to personal or corporate checks.   The court's usage of the term “checks” (although applying its reasoning to corporate checks in that particular instance) can consistently be applied to checks and negotiable instruments in the generic sense.2

City National's third amended complaint alleges that Crocker owed a duty to use due care in handling the negotiation of City National's checks.   This duty of due care included a duty to inquire as to whether the cashier's checks issued to Crocker without any mention of personal account numbers could properly be credited to Warren's own personal account.   Breach of that duty as well as damages incurred as a proximate result of that breach were also pled.   For the reasons stated above, we conclude that City National has alleged facts sufficient to state a cause of action against Crocker for negligence.3

 City National's second cause of action in its third amended complaint sought recovery of money paid by mistake.   That complaint alleged that the $125,000 paid by City National to Crocker was paid under a mistake of fact, said mistake being premised upon City National's mistaken belief that Crocker was owed or otherwise was entitled to the money represented by the checks when, in fact, it was not owed or entitled to that amount;  that City National was unaware of the true facts as alleged;  that Crocker was not an “innocent” party in connection with the payment since Crocker was negligent;  and that any change in position by Crocker because of City National's payments made under the mistake of fact was the sole or partial result of Crocker's own negligence.

The case of National Bank of California v. Miner (1914) 167 Cal. 532, 140 P. 27 is principally relied upon by City National.   In Miner, the California Supreme Court set forth the standard of liability for mistake:  “ ‘ “It is now settled ․ that money paid under a mistake of fact may be recovered back, however negligent the party paying may have been in making the mistake, unless the payment has caused such a change in the position of the other party that it would be unjust to require him to refund.” ’ ”  (Sun 'N Sand, Inc. v. United California Bank, supra, 21 Cal.3d at p. 700, 148 Cal.Rptr. 329, 582 P.2d 920, quoting from National Bank of California v. Miner, supra, 167 Cal. at p. 537, 140 P. 27.)

Crocker maintains that City National is absolutely barred from recovery for payment by mistake since Crocker's position changed as a result of City National's payment of its eight cashier's checks.   The argument continues that there is no requirement that Crocker be an innocent payee or that it be found negligent in handling the negotiations of the checks for City National to have stated a cause of action for money paid by mistake.   Such findings, it is contended, are irrelevant since Crocker has irrevocably changed its position as a result of City National's payment of the eight cashier's checks.

Crocker's stated argument that City National's payment of the eight cashier's checks has irrevocably altered its position is as follows:  City National's complaint alleges that Warren deposited the checks into his account at Crocker and that City National paid the checks upon presentment by Crocker.   Once City National paid the checks, Crocker's credit to Warren's account became “final” under section 4212, subdivision (1), and section 4213, subdivision (4)(a), of the Commercial Code.   Since Crocker could not thereafter recover the monies paid from Warren, City National could not recover against Crocker.   Thus, no cause of action can be stated against Crocker for payment by mistake.

With respect to Crocker's contention that City National's payment of the checks irrevocably alters its position, the question presented is not limited entirely to whether Crocker's position has been irrevocably altered, but whether it would be unjust to require a refund even had an irrevocable change in position occurred.  (Sun 'N Sand, Inc. v. United California Bank, supra, 21 Cal.3d at p. 700, 148 Cal.Rptr. 329, 582 P.2d 920.)

The general rule is that money paid under a mistake of fact may be recovered.   This rule is based upon the principal that money paid through misapprehension of facts in equity and in good conscience belongs to the person who paid it.   (87 A.L.R. 649–650.)

Division 4 of the Commercial Code establishes the rules and procedures governing the collection of checks and other negotiable instruments for the payment of money by banks.  (See § 4101 et seq.)

Section 4212, subdivision (1), of the Commercial Code allows a collecting bank to charge back a credit “if by its midnight deadline or within a longer reasonable time after it learns the facts it returns the item or sends notification of the facts.”  (Security Pac. Nat. Bank v. Associated Motor Sales (1980) 106 Cal.App.3d 171, 181, fn. 7, 165 Cal.Rptr. 38.)

Section 4213, subdivision (4)(a), also known as the “final payment rule,” allows a credit to be given by a bank which becomes available for withdrawal as a right when the bank receives a final settlement and has a reasonable time to learn that the settlement is final.   The logic of this procedure is self-evident.   At the time the bank's right to revoke its provisional settlement with its customer terminates (§ 4212, subd. (1)), it must give credit to its customer and may not protect itself by debiting the customer's account.   (Sun 'N Sand, Inc. v. United California Bank, supra, 21 Cal.3d at p. 689, 148 Cal.Rptr. 329, 582 P.2d 920.)

It is clear that final payment as prescribed by section 4213, subdivision (4)(a), has occurred.   Crocker may not maintain an action to revoke, charge back, or obtain a refund against Warren since a “final payment” of funds has been achieved.  (See § 4212, subd. (1);  Security Pac. Nat. Bank v. Associated Motor Sales, supra, 106 Cal.App.3d at p. 181, fn. 7, 165 Cal.Rptr. 38.)

Crocker's position has been altered.   However, the alteration has not been irrevocable.   The terms as set forth in Sun 'N Sand for properly stating a cause of action for payment of funds by mistake are broader than those by which Crocker seeks to limit them.

Crocker refers us to Fireman's Fund Ins. Co. v. Security Pacific Nat. Bank (1978) 85 Cal.App.3d 797, 149 Cal.Rptr. 883, and First Nat. Bank in Miles City v. Nunn (Mont.Sup.Ct.1981) 628 P.2d 1110 for the proposition that once final payment was achieved under section 4213, the payor bank cannot recover from its customer.

In Fireman's Fund Ins. Co. v. Security Pacific Nat. Bank, supra, 85 Cal.App.3d 797, 149 Cal.Rptr. 883, an action was brought by Fireman's Fund against Security Pacific to recover $25,000, the amount of a check drawn on the account of Fireman's insured, Daniel Reeves & Company.   The problem arose when Jason Keyes, a controller at Reeves, forged one of the drawer's signatures on a check drawn from the Reeves' account at Banco Popular De Puerto Rico.   At about the same time the forgery was committed, Keyes opened an account at Security Pacific in the name of G.C. Associates.   After the forgery, Keyes took the check to Security Pacific and deposited it into the G.C. Associates account.   The check had a typewritten endorsement with the company name and the specific account number referred to.   Security Pacific accepted the check and after the check was paid by Banco, the money was withdrawn by Keyes.   At that time, Keyes had authority to sign for G.C. Associates.   Security Pacific forwarded the check for payment to Banco.   Banco paid Security Pacific and debited the Reeves account.   Fireman's paid Reeves the $25,000 as part of its obligation under a fidelity bond.   Fireman's then sought to recover the funds from Security.

In Fireman's Fund, we concluded that Fireman's was suing the wrong party.   If any cause of action existed against a bank, we determine that it was against the drawee bank, Banco, and not the depository bank, Security Pacific.   We found that Banco and not Security had breached its contractual obligation to Reeves (its customer), as well as violated its duty under section 4401 to pay only checks “properly payable.”  (Id., at p. 805, 149 Cal.Rptr. 883.)

In Fireman's Fund, it was argued that section 3418, the final payment rule for Division 3, did not bar a drawer's direct cause of action for common law negligence against the collecting bank for its handling of a check bearing a forged maker's signature.  (Id., at p. 818, 149 Cal.Rptr. 883.)   In discussing whether Security Pacific could avail itself of the protection of section 3418,4 we held that Security Pacific had, in fact, altered its position in good faith when it allowed Keyes to withdraw the $25,000 after it had received final payment from Banco.  (Id., at pp. 822–823, 149 Cal.Rptr. 883.)   Comment 4 to section 3418 we noted was inapposite to Fireman's then stated position that “good faith” under section 3418, required a consideration of “ ‘negligence and all the circumstances surrounding the transaction’ in question.”  (Id., at p. 823, 149 Cal.Rptr. 883.)

Comment 4 clearly stated that the negligence of the holder in due course did not affect the finality of payment or acceptance unless the negligence amounted to a lack of good faith or to notice under the rules (§ 3–304) relating to notice to a purchaser of an instrument.  (Ibid.)  We determine by applying Sun 'N Sand's definition of one having “reason to know” (21 Cal.3d 671, 697, fn. 21, 148 Cal.Rptr. 329, 582 P.2d 920) that the “validity” of the instrument presented to Security Pacific was not so irregular as to place it in doubt.  (Fireman's Fund Ins. Co. v. Security Pac. Nat. Bank, supra, 85 Cal.App.3d at pp. 824–825, 149 Cal.Rptr. 883.)

“Unlike Sun 'N Sand, in which the defendant bank's ‘negligence derives from its failure to respond reasonably to the “notice” conveyed by ․ suspicious circumstances,’ ․” (id., at p. 825, 149 Cal.Rptr. 883, quoting from Sun 'N Sand, supra, 21 Cal.3d at p. 697, 148 Cal.Rptr. 329, 582 P.2d 920), there was no “ ‘objective indicia [here] from which [it] could reasonably conclude that the party presenting the check [was] authorized to transact in the manner proposed.’ ”  (Ibid.)

The presence of two signatures on the check, in that case, only one of which was that of Keyes, the forger, coupled with the fact that a specific name and account number was designated as payee of the check, satisfied the requirements of objective indicia stated in Sun 'N Sand.  (Id., at p. 827, 149 Cal.Rptr. 883.)   Therefore, the loss distributive scheme, articulated in section 3418, was applicable to the fact pattern (forged drawer's signature) as alleged, and section 3418 displaced an action for common law negligence.   (Ibid.)

In the instant case, Crocker argues that the final payment rule under Division 4 (section 4213) also establishes a loss distributive scheme that by analogy to Division 3's loss distributive scheme should likewise preclude a negligence action by City National.5

In Fireman's Fund, we found that Fireman's proffered argument that section 3418 did not preclude a negligence action violated the plain meaning of section 3418 that “payment or acceptance of any instrument is final in favor of a person who has in good faith changed his position in reliance on the payment.”  (Id., at p. 827, 149 Cal.Rptr. 883, quoting from section 3418.)   In that case, we found that, “Only by the use of a negative inference can the language of section 3418 be said not to preclude an action [for negligence] by a drawer.”  (Id., at p. 828, 149 Cal.Rptr. 883.)   We also noted, however, that “ ‘ “[w]here a section is silent on a particular point [as is section 4213], [a] negative inference may be justified when the reason of the situation requires such an inference.” ’ ”  (Ibid., quoting from Franklin, On the Legal Method of the U.C.C. (1951) 16 Law & Contemp.Prob. 330, 335.)   We believe that the present circumstance dictates that section 4213 should not exclude a negligent cause of action.

In First Nat. Bank in Miles City v. Nunn, supra, 628 P.2d at page 1115, the Montana Supreme Court did conclude that the depository bank which sought to recover the amount of a check, paid by one of its customers, no longer had the right to charge back or obtain a refund from that customer.   What Crocker fails to recognize, however, was that the court also determined that the depository bank was not precluded from seeking to hold its customer liable for breach of her warranty of good title.  “[G]ood title [it stated] requires that all necessary endorsements be genuine and authorized.”  (Accord, § 3417, subd. (1)(a).)

Accordingly, while Crocker is precluded from maintaining an action for a refund or charge back, Crocker can maintain an action for recovery of those funds wrongfully deposited by Warren under a breach of warranty of good title theory.   Such a conclusion is supported by subdivision (5) of section 4212 which provides that, “ ‘A failure to charge back or claim refund does not affect other rights of the bank against the customer or any other party.’ ”   (Security Pac. Nat. Bank v. Associated Motor Sales, supra, 106 Cal.App.3d at p. 181, 165 Cal.Rptr. 38.)   Therefore, “final payment” in the collection process is not an automatic preclusion to recovery against a responsible party acting in a criminal capacity.

In any event, the “final payment” rule cannot be limited to its technical meaning and effect if the effect frustrates the intentions of the drafters.   (Fireman's Fund Ins. Co. v. Security Pacific Nat. Bank, supra, 85 Cal.App.3d at p. 828, 149 Cal.Rptr. 883.)   In this case, a technical application would only serve to frustrate the principles recognized by the Supreme Court in Sun 'N Sand, Inc. v. United California Bank, supra, 21 Cal.3d 671, 148 Cal.Rptr. 329, 582 P.2d 920.

A drawer of a check made payable to a bank is owed a duty of care by the payee bank.   A payee bank which breaches the duty owed to a drawer proximately resulting in damage to the drawer remains subject to liability notwithstanding a final payment that occurs in the collection process.

Finally, even assuming that the negligent payments of the eight cashier's checks by City National irrevocably altered Crocker's position, City National would not be precluded from recovery under a payment by mistake theory.

As stated in National Bank of California v. Miner, supra, 167 Cal. at page 532, 140 P. 27, “ ‘․ money paid under a mistake of fact may be recovered back, ․ unless the payment has caused such a change in the position of the other party that it would be unjust to require him to refund.’ ”  (Quoting from National Bank of Commerce v. National Mechanics Association, 55 N.Y. 211, 213;  emphasis added.)

It is not unjust to require a party that acted negligently 6 to refund those monies paid as a proximate result of that negligence notwithstanding any change of position.   Where one of two innocent parties must suffer as a result of the actions of a third party, the party, by whose negligence it happened, must be the sufferer.  (National Bank of California v. Miner, supra, 167 Cal. at p. 537, 140 P. 27.)

The order of dismissal is reversed.

FOOTNOTES

1.   The negligence theory was based upon the allegation that Crocker allowed Warren to deposit the cashier's checks in his account at Crocker without Crocker first inquiring of City National whether City National's own cashier's checks could be negotiated.The mistake theory was premised upon the contention that City National paid each of its own eight cashier's checks over the three-month period “by mistake” so it should be allowed to recover the $125,000 from Crocker.

2.   In Joffe v. United California Bank, supra, 141 Cal.App.3d 541, 190 Cal.Rptr. 443, Allstate Savings and Loan Association issued a check made payable to the escrow department of Wells Fargo Bank.

3.   Our holding, of course, merely relates to whether City National has stated a cause of action for negligence against Crocker.   Certainly, allegations of comparative negligence on the part of City National must be considered in determining the respective rights of the parties.

4.   Section 3418 states as follows:“Except for recovery of bank payments as provided in the division on bank deposits and collections (Division 4) and except for liability for breach of warranty on presentment under the preceding section, payment or acceptance of any instrument is final in favor of a holder in due course, or a person who has in good faith changed his position in reliance on the payment.”

5.   Crocker also finds Fireman's Fund significant for the proposition that City National violated section 4401.   Here, it is argued that City National was in the best position, as was Banco in the Fireman's Fund case, to know if the checks in question should have been paid.   As we noted earlier, this may give rise to a finding of some degree of comparative negligence on the part of City National.  (See fn. 3, ante.)

6.   On appeal from a demurrer, the appellate court assumes plaintiff's allegations to be true.  (Sackett v. Wyatt (1973) 32 Cal.App.3d 592, 601, 108 Cal.Rptr. 219.)

STEPHENS, Associate Justice.

FEINERMAN, P.J., and HASTINGS, J., concur.

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