Filed 5/14/14 Hemaratanatorn v. Pasternak CA2/8 NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION EIGHT

ADESORN HEMARATANATORN,

Cross-Complainant and Appellant,

MICHAEL HELLYAR,

Cross-Defendant and Appellant,

v.

DAVID J. PASTERNAK,

Respondent. B245701

(Los Angeles County Super. Ct. No. VC056465)

APPEAL from an order of the Superior Court of Los Angeles County. Thomas McKnew, Judge. Affirmed.

The Jamison Law Firm and Guy E. Jami son for Cross-Complainant and Appellant,

Adesorn Hemaratanatorn.

Michael J. Allison for Cross-Defenda nt and Appellant, Michael Hellyar.

David J. Pasternak, in pro. per., for Receiver and Respondent.

________________ ______________2 In 2010, the marital dissolution action of Michael and Annette Hellyar expanded to include a dispute over the ownership of a corporation, MBE Digital, Inc., a large format digital printing business. In additi on to Michael and Annette Hellyar, additional parties became involved, all disputing the owners hip of the business. In August 2010, at the request of Adesorn Hemara tanatorn and Michael Hellyar (collectively appellants), the trial court appointed a receiver. In Novemb er 2012, the trial court issued an order approving and settling the receiver’s final repo rt. The individual pa rties to the dispute were ordered, jointly and severally, to pay the approved final compensation and reimbursement of costs for the receiver, and compensation and costs of service providers retained by the receiver, in th e amount of $626,244.11. Appe llants challenge the order. They contend the trial court abused its disc retion in ordering them to bear joint and several responsibility fo r the receiver’s compensation and receivership costs. We find no

abuse of discretion and affirm.

FACTUAL AND PROCED URAL BACKGROUND According to a complaint fo r joinder Michael Hellyar file d in March 2010, in July 2009, Annette Hellyar (now Le iva) filed a petition for dissolution of her marriage to Michael Hellyar. 1 In the dissolution proceedings, Leiva contended a business, MBE Digital, Inc. (MBE), was a community asset. In the complaint for joinder, Hellyar alleged Leiva held 50 percent of MBE’s stoc k in trust for Hellyar; Cindy Lujan held 25 percent of MBE’s stock in trust for Brian Ra yner; and Adesorn Hema ratanatorn held 25 percent of MBE’s stock, which was issued to him as security for a $530,000 loan to Hellyar. Hellyar asserted MBE was not a comm unity asset, and Leiva had repudiated her agreement to hold shares of MBE solely in trust for He llyar. Among other claims, Hellyar sought declaratory re lief to establish his rights, and those of Leiva, Lujan, Rayner, and Hemaratanatorn, with respect to MBE.

1 As of the last proceedings in the reco rd, Annette Hellyar’s name had changed to Annette Leiva. To avoid conf usion, we will refer to Annette as “Leiva” for the remainder of the opinion, and to Mich ael Hellyar, as “Hellyar.”3 In May 2010, Hemaratanatorn filed a cross-complaint against MBE, Rayner, Leiva, Lujan, and Hellyar. Hemaratanatorn alleged Leiva, Rayner , and Lujan breached their fiduciary duties by retiring his shares without reason, taking compensation from MBE for their own benefit, converting MBE’ s customers and other assets, refusing him

and other shareholders access to MBE’s book s and records, and engaging in conduct contrary to the interests of MBE and its sh areholders. Hemaratanatorn further alleged MBE and Hellyar breached their contract with him by failing to make loan payments to him. Hemaratanatorn sought injunctive relief to prevent Le iva, Rayner, and Lujan from compensating themselves with MBE revenue, selling or disp osing of MBE’s assets, or engaging in other activity that might affect the rights and interests of appellants. He further sought removal of Leiva, Rayne r, and Lujan from MBE and an accounting. In June 2010, appellants filed an ex pa rte application for the appointment of a receiver for MBE. They filed a supplemental application later the same month. Lujan, Rayner, and Leiva opposed the application. At a July 1, 2010 hearing, the court suggested there could be less drastic alternatives to appo inting a receiver. Appellants vigorously argued that significa nt oversight of MBE was requi red. At the conclusion of the hearing, the court indicated it was not inc lined to appoint a receiver; instead the court suggested it would appoint someone to revi ew the business’s books and records. The court asked the parties to submit names fo r consideration and took the matter under

submission. In August 2010, the trial c ourt issued an order appointing David J. Pasternak as receiver “to conduct an investig ation regarding the financial a ffairs of MBE Digital, Inc. and to file and serve a written report detaili ng the Receiver’s findi ngs within 90 days from the date of this Order. Among other th ings, the Receiver shall report about the appropriateness of claimed business expenses.” The order allowed the receiver to charge his standard hourly billing rate of $495 per h our, and to receive reimbursement of costs. He was authorized to employ the services of accountants and ot her professionals in connection with his duty. As to paym ent of the receiver, the court ordered:4 “The Receiver shall prepare and serv e monthly statements reflecting the Receiver’s fees and administrative expenses , including reasonable fees and costs of accountants and attorneys and ot her professionals authorized by the Court, incurred for each monthly period in the operation and admi nistration of the Receivership estate. Within 10 days after service of each statemen t, MBE Digital, Inc. shall pay the amount of each statement, subject to further reallocati on by this Court. Notwithstanding periodic payment of fees and e xpenses, all fees and e xpenses shall be submitted to the Court for its approval and confirmation, in the form of either a [properly] noticed interim request for fees, a stipulation of all parties, or in the Receiver’s Final Account and Report.” In December 2010, Hemaratanatorn filed another ex parte application requesting that the court grant the receiver full powers over MBE. Based on declarations from Hellyar and a former MBE employee, Hemarata natorn asserted Leiv a, Rayner, and Lujan were converting MBE’s business to a new company, BMR Digital (BMR).

Hemaratanatorn further noted MBE had not responded to several of the receiver’s requests for documentation. In a letter to MBE’ s counsel, the receiver had indicated there were significant differences between MBE’s reco rds and previously produced tax returns. The former employee declared she heard Ra yner and Lujan discussing how they would exclude appellants from the business. She furt her declared Rayner and Lujan instructed her to transfer MBE’s clients to BMR, an d she observed MBE’s eq uipment being used by BMR. She additionally report ed Lujan and Rayner reimbur sed Rayner for many personal expenses, including his rent, and that Leiv a was included on MBE’s payroll even though she did not appear to perform any work for the company. Hellyar declared MBE’s sign had been removed from the business’s premis es and replaced with a BMR sign, and the

website for BMR directed us ers to the MBE website. The trial court issued an order granting the receiver full and exclusive power, duty, and authority to administer and manage a ll of MBE’s business affairs. The order

authorized and instructed the receiver to ta ke possession of MBE’s records, assets, and property. Regarding compensa tion, the supplemental order again approved the receiver’s hourly rate, and ordered him to prepare and serve monthly statements reflecting his fees5 and administrative expenses. The order fu rther provided: “Upon service of each statement, the Receiver may disburse from Es tate funds, if any, the amount of each statement. Notwithstanding pe riodic payment of fees and expenses, fees and expenses shall be submitted to the Court for its approval and confirmation in the form of either a properly noticed interim request for fees, stip ulation of all parties, or Receiver’s Final Report and Account.” MBE appealed. In an unpublished opinion, this court affirmed the order. ( Hellyar v. MBE Digital, Inc. , (April 25, 2 012, B231107).) At the end of December 2010, the receive r filed his first interim report for the period ending November 30, 2010. He had posted his bond, filed his oath, and hired forensic accountants. However, the par ties had not supplied the information and documents he needed to adequately investig ate or report on MBE’s financial affairs. The report indicated the receiver intended to pay his bills, subject to the court’s future confirmation, when there were sufficient fund s in the receivership estate to do so. In January 2011, the receiver requested an order adding BMR to the receivership. The receiver reported: “MBE ha s insufficient funds to operate independent of BMR. Despite demand by the receiver, BMR has failed and refused to turn over its receipts directly to the receiver. It appears that si gnificant funds may have been siphoned off through BMR or otherwise. In order for this receivership to operate, or for the forensic investigation to be completed, full access to BMR must be given to the receiver and his forensic accountants. In short, this receivershi p either should be term inated or should be expanded to include BMR.” The trial court granted the request to include BMR in the receivership. In February 2011, at the receiver’s request , the trial court authorized Hellyar to run the receivership business under the receiver’s control. In May 2011, the court, in response to an ex parte application filed by the receiver, enjoined Rayner and Lujan from operating any competing large format printi ng or installation business in California during the pendency of the litig ation. The court also adde d to the receivership iMS International and any other competing busine sses affiliated with Rayner and Lujan. The court issued accompanying fa cilitating orders, such as an order to the Los Angeles6 County Sheriff’s Department to assist the rece iver in entering and seizing property relating to MBE, BMR, iMS In ternational, and any other affiliated businesses, from

various addresses. The court later authorized the receiver to consolidate the operations of MBE, BMR, and iMS International.

In a declaration filed with the court in Ma y 2011, the receiver declared that while Rayner and Lujan were opera ting MBE and BMR, they di d not cooperate with his attempts to enforce the receiv ership orders. After he rem oved them from the receivership business, they formed and operated a compe ting business, thereby diverting many clients from the receivership business. When the receiver had the competing business added to the receivership, Rayner and Lujan establis hed a third competing business, using MBE and BMR employees, and providi ng services to clients they had diverted. One of the receiver’s employees declared that when sh e took control of iMS International, she discovered equipment necessary to operate a large format printing and installation business, client lists that in cluded former MBE clients, and a camera that had disappeared

from the MBE/BMR offices. The receiver filed an application for an order to show cause regarding contempt against Rayner and a third party. 2 In his third interim repor t, filed in July 2011, the

receiver recounted his efforts to enforce the receivership orders. The receiver reported that when he and Hellyar went to the re ceivership business in February 2011, Rayner instructed “two taser-armed guards to prev ent the receiver from en tering the business. [Rayner] and Ms. Lujan proceeded to attempt to physically attack Mr. Hellyar, and had to be restrained by the receiver’s security pers onnel and two police offi cers who were called to the scene.” The receiver further reported th at after Rayner and Lujan left the business,

the receiver’s staff discovered the MBE co mputers had been tampered with, which prevented the business from operating the next day. A printer Rayner and Lujan left at

2 In August 2011, the trial court found Rayner guilty on thre e contempt counts. The court ordered Rayner to pay $3,000 in c ontempt fines, and the receiver’s attorney fees and costs incurred in the contempt pro ceeding, totaling $45,000. According to the receiver’s final report, Rayner never paid any portion of the assessed fines and fees.7 the business premises never func tioned after their departure. The receiver also reported problems with MBE’s liability and umbrella insurance policy, wh ich Rayner and Lujan

had converted to cover BMR in late 2010. The receiver discovered MBE had no current worker’s compensation coverage. The receiver reported that due to the pre -receivership operation of the receivership business, and the diversion of business and funds from the receivership business, MBE was in significant debt. Although MBE’s business was improving, the receiver had not been able to significantly re duce the company’s financial ob ligations, even though BMR had incurred most of the pre-existing debt. These obligations, and the operations of the businesses prior to the receive rship, had generated multiple lawsuits. The receiver was now defending and attempting to resolve thes e suits. The receivership’s unpaid fees and costs at that point exceeded $250,000; he had also retain ed other professionals whose unpaid fees and costs totaled over $44,000. The receiver e xplained: “Because of the lack

of available funds in this receivership estate, none of the receivership costs of administration have been paid to date. Purs uant to this court’s orders, the receiver intends to pay the attach ed billing statements subject to th is court’s future confirmation to

the extent that there are ever su fficient funds in this receivership estate to do so. [¶] This has been an expensive receivers hip estate because of the lack of cooperation by Rayner, Ms. Lujan and their cohorts, an d the repeated violations of this court’s receivership

orders.” In or around August 2011, Rayner and Lu jan moved to terminate the receivership or, alternatively, for an order allowing MBE to file for bankruptcy protection. 3 The receiver opposed the motion, arguing Rayner and Lujan were attempting to circumvent

the receiver’s efforts to rebuild MBE and undo the damage Ra yner and Lujan had themselves done to the comp any. The receiver noted Ra yner and Lujan complained

about the receiver’s fees and costs but failed to note that their actions had caused greater

3 It is unclear when the motion was first filed. The record does not include a copy of the motion, only an August 17, 2011 notice continuing the hearing on the motion. The record also does not include a formal ruling on the motion.8 costs than might have been otherwise. Hellyar joined the receiver’s opposition. In response to the receiver’s fifth interi m report for August 201 1, Rayner and Lujan continued to argue the recei vership should be terminated because the business had “become nothing but a sh adow of its former self, losing hundreds of thousands of dollars and running up debts that it w ill never be able to pay.” In October 2011, the receiver filed a liab ilities report, setting forth the liabilities against the receivership estate and an analys is of expected future business revenue. The report indicated Lujan and Rayner’s records showed thei r mismanagement of company assets; neither MBE nor BMR was prof itable, even before the receivership; and Lujan and Rayner’s records failed to accoun t for large tax and assessment payments owed to state agencies. However, the rece iver concluded the company continued to operate and business had increased under Helly ar’s management. The receiver expected that with additional time, the business could “l ook forward to being able to be operated in

a sound financial fashion . . . .” In November 2011, Lujan and Rayner filed another motion to terminate the receivership and for an order directing the rece iver to file bankrupt cy petitions on behalf of MBE and BMR. They also sought term ination of the injunction barring them from competing with the receivership businesses. Lujan and Rayner asserted MBE’s losses continued to grow and it was unlikely the business would generate enough profit to reduce its debt. They argued there was therefor e no reason to continue the receivership. Appellants jointly opposed th e motion as to MBE. They did not object to the termination of the receivership of BMR, or for an order directing the receiver to file bankruptcy for BMR. Howeve r, with respect to MBE, they asserted the business was a profitable and viable company. The oppo sition noted Hemaratanatorn had invested significant sums in MBE, and had recently purchased large printi ng machines so that MBE could continue its operations. Appella nts noted: “While it is true that the receivership is a financial burde n on the business of MBE, such a situation is not entirely uncommon with receivership. If the Receiv er is able to effectively continual [ sic ] the management of MBE so that it may be pr ofitable and able to slowly satisfy its9 liabilities, . . . MBE should be able to re cover from the egregious wrongs committed by Cross-Defendants Brian Rayne r and Cindy Lujan.” The receiver supported the motion to termin ate the receivership. He informed the court he supported the motion “because [he] had received no compensation or reimbursement of costs for [his ] services in this matter, and the considerable time and expenses were taking a significant fina ncial toll on [him] and [his] office.” 4 The trial

court denied the motion to te rminate the r eceivership. In mid-December 2011, the receiver filed his sixth interim report. His fees and costs totaled $417,073.85; the unpaid fees a nd costs of third parties he hired were an additional $90,498.48. As in previous reports, the receiver informed the court that none of the receivership costs of administration had been paid due to the lack of funds in the receivership estate. But the report added: “H owever, the Receiver can not continue to serve in this matter any longer unless th e parties provide for the payment of the receivership’s substantial unpaid costs of admi nistration. [¶] As previously reported, this has been an expensive rece ivership in large part because of the lack of cooperation by Rayner, Ms. Lujan and their cohorts, and the violations of this Court’s receivership Orders.” In late December 2011, the receiver filed a seventh interim report. In addition to repeating the statement that the receiver could not continue to serve without payment,

he informed the court: “This matter is schedu led for trial in early February, 2012, and the Receiver expects this receivership to termin ate immediately thereafter, and will ask the court to hold all of the individual parties jo intly and severally responsible for the unpaid receivership costs of administration.” In early February 2012, the court conduc ted a bench trial on the equitable claims at issue. In early April 2012, the court i ssued an order regarding termination of the receivership. Under the orde r, upon payment of $250,000 to the receiver, the receiver was to turn over custody, possession, and control of the receivership business to

4 No formal response from the receiver is included in the record, nor is there a transcript from any heari ng on the motion. However, the receiver summarized his position in the subsequent fi nal report and accounting.10 appellants. The funds were to be used to first resolve payroll tax claims against MBE, and, second, to pay a portion of the unpaid receivership co sts of administration. The

receiver was to file and serve his final re port and account within 60 days after turning

over the business. In late April 2012, the court issued a st atement of decision regarding the equitable claims. Among other findings, the court concluded Leiva held MBE shares in trust for Hellyar; Hemaratanatorn acquired and still owne d 100 shares of MBE stock; the shares were not collateral for money he loaned MB E; and Hellyar was to retain possession and

control of MBE for the benefit of its share holders. The court determined the receiver’s obligations would conc lude upon the court’s approval of the receiver’s final report and accounting. The statement of decision in dicated: “The court shall approve any reasonable fees and costs remaining due a nd owing to the receiver and his retained accountant.” The court additionally noted: “The receiver’s and accountant’s fees are

substantial. The court was not asked to de termine whether MBE shall be liquidated due to alleged insolvency or determine the amount of debt it may owe to [Hemaratanatorn], vendors, employees, if any, and other creditors . [¶] Whether or not MBE will be forced into bankruptcy or reorganization is not be fore the court. Based upon its findings, the court’s decision is to prevent Rayner a nd Lujan from mismanaging MBE for their own self-interest, including looting the business of monies and phys ical assets and directly or indirectly competing with MBE fo r a reasonable time. [¶] To the extent that bad faith is alleged by Hellyar on one hand and Rayner and Lujan on the other, the court finds that Rayner and Lujan have acted in bad faith during all relevant times.” In May 2012, the receiver file d an eleventh interim report. 5 The receiver explained the $250,000 payment was not ma de in March 2012 as ordered, thus the

5 The receiver filed his eighth report in February 2012, and his ninth and tenth reports in March 2012. These reports indicated that in December 2 011, the receiver had supported Rayner’s motion to terminate the receivership, an d that the court denied the motion but stated it would not continue the trial and would reconsider the termination motion following the conclusion of the trial. These reports also reiterated that the11 receivership had conti nued that month. In July 2012 , MBE, through Hellyar, filed a voluntary Chapter 11 bankru ptcy petition, without the receiver’s knowledge. In September 2012, the receiver filed a fi nal report and accounting. The receiver identified his total unpaid fees and costs as over $535,000. In addition, forensic accountant fees, security fees and costs, and forensic computer consultant fees and costs totaled over $90,000. The receiver asked the court to order all individual parties jointly and severally responsible for payment of the unpaid receivership costs of administration

“because all of them are or cl aimed to be owners of the re ceivership business, and this receivership thereby operated that business fo r their benefit during this receivership. This request is not a surprise because I have repeatedly stated my in tention to make this request in my previously filed and served interim reports.” Appellants opposed the final report. Helly ar argued the receive r’s costs should be paid out of the funds of the receivership and, while they were not available because of the bankruptcy petition, the funds had not yet been determined to be insufficient to pay the receiver. Hellyar further assert ed the conduct of Rayner a nd Lujan made the receivership necessary, and it would be unfair to hold appe llants responsible for the receiver’s costs. Hemaratanatorn similarly argued the receiver s hould not be able to avoid filing a claim in the bankruptcy proceeding. He also contende d the appointment of a receiver was proper due to Rayner and Lujan’s conduct, thus ap pellants should not be held accountable for the receivership costs. Hemaratanatorn took issue with some of the receiver’s actions, asserting the receiver’s services “may have in actuality hurt the business of MBE to almost the same degree, if not worse, th an defendants [Leiva, Rayner, and Lujan].”

receiver was having difficulty continuing to se rve without payment, and that he intended to ask the court to hold all of the parties jo intly and severally responsible for the unpaid receivership costs.12 Hemaratanatorn further asserted he ha d never operated or managed MBE, had no ownership interest in BMR, and was “truly an innocent party.” 6 In response, the receiver argued it was equitable to hold appellants equally responsible for the receivership costs because th ey were in a better position than he or the court to understand the potential assets, liabilitie s, and business prospects of MBE, before the receivership. The receiver also noted he ke pt all parties informed of the receivership costs as they grew and the receivership bu siness’s inability to pa y those costs. He asserted appellants repeatedly fought to keep the receiver in place, despite the costs and the receivership’s inability to cover the costs. He additiona l argued: “Hellyar has now – unilaterally and without any notice to this Court or the Receiver—filed Chapter 11 proceedings in order to wrest control of the receivership business from the Receiver, thereby avoiding payment of any of the rece ivership fees and costs and obtaining control

of that business for himself and Hemaratanatorn.” The receiver argued it wo uld be “highly inequitable” to force him to seek relief in bankruptcy court because the time, effort and costs would be significant and not recoverable by the receiver; any award of fees or costs could take years to distribute, and he had already gone unpaid si nce the beginning of the receiv ership; and: “as this Court and all parties are aware, any attempt by the Receiver to fully recover what he is due from the Company will be fruitle ss because there are nowhere near sufficien t funds (and probably no business fu nd), nor have there ever been.” The receiver asserted the more equitable course was joint and several liability of all of the parties for the receivership costs, along with an order assigning “any clai m [the receiver] has against Debtor jointly and severally to [the] individual parties, who can then pursue those claims themselves if they believe they have any value.”

6 The State Board of Equalization also f iled an objection to the receiver’s final report on the ground that the receiver had failed to file sales tax re turns and pay the sales tax liability of MBE.13 In November 2012, the trial court approved the receiver’s final report and account. The court ordered payment of a ll of the receiver’s outstanding fe es and costs, and the fees and costs of the forensic accountants, forens ic computer consultants, and security company the receiver had retained. The court ordered Leiva, Hellyar, Lujan, Rayner, and Hemaratanatorn, jointly and severally, to pa y the final compensation and reimbursement of costs, totaling $626,244.11. The court a ssigned to the individual parties jointly and severally any and all claims the receiver held against MBE, now a debtor in bankruptcy. Appellants timely appealed.

DISCUSSION

The Trial Court Did Not Abuse its Dis cretion in Holding Appellants Jointly and Severally Responsible for the Receiver’s Costs and Fees Appellants’ sole contention on appeal is that the trial court erred in holding them jointly and severally responsibl e for the receiver’s costs and fees. We find no abuse of

discretion. “A receiver is an agent and officer of the court, and is under the control and supervision of the court. (Code Civ. Proc., § 568; Cal. Rules of Court, rule 3.1179.) The receiver is also a fiduciary who must act for the benefit of all parties interested in the property. [Citation.] [¶] Receivers are en titled to compensation for their own services and the services performed by their attorneys. [Citation.] . . . . Courts are vested with

broad discretion in determini ng who is to pay the expenses of a receivership, and the court’s determination must be upheld in the absence of a clear showing of an abuse of discretion. [Citations.]” ( City of Chula Vista v. Gutierrez (2012) 207 Cal.App.4th 681, 685-686 ( City of Chula Vista ).) “A ruling that constitutes an abuse of disc retion has been descri bed as one that is ‘so irrational or arbitrary that no reasonable person could agree with it.’ [Citation.] But

the court’s discretion is not unlimited . . . . Rather, it must be exercised within the confines of the applicable legal principles. [¶] ‘The discretion of a trial judge is not a whimsical, uncontrolled power, but a legal discre tion, which is subject to the limitations of legal principles governing the subject of its action, and to reversal on appeal where no14 reasonable basis for the action is shown.’ [C itations.] ‘The scope of discretion always resides in the particular law being applied, i.e., in the “legal principles governing the subject of [the] action. . . .” Action that transgresses the confines of the applicable principles of law is outside the scope of di scretion and we call such action an “abuse” of discretion. [Citation.] . . . [¶] The lega l principles that govern the subject of discretionary action vary greatly with contex t. [Citation.] They are derived from the

common law or statutes under which discretion is conferred.’ [Citation.] To determine if a court abused its discretion, we must thus co nsider ‘the legal princi ples and policies that should have guided the court’s actions.’ [Citation.]” ( Sargon Enterprises, Inc. v. University of Southern California (2012) 55 Cal.4th 747, 773.) The legal principles and policies regard ing the payment of receivership expenses are well established. “Generally, the costs of a receivership are paid from the property in the receivership estate. [Citati ons.] However, courts may al so impose the receiver costs on a party who sought the appointment of the receiver or ‘ “apportion them among the parties, depending upon circumstances.” ’ [C itation.] . . . . [¶] . . . [¶] A court may require one or more parties to pay for receiv er fees where the property subject to the receivership is inadequate to compensate the receiver and/or where other equitable circumstances support imposing fees on a pa rty. [Citations.] In considering the appropriate source for the compensation, a rele vant factor is whether the party to be charged obtained a benefit from the re ceiver’s services. [Citation.]” ( City of Chula Vista, supra, 207 Cal.App.4th at pp. 685-686.) In this case, the receiver repeatedly informed the cour t the receivership property was inadequate to compensate him or his retain ed consultants. The record also indicated appellants received a benefit from the receiv er’s services. At the outset of the proceedings, and immediately after the receive rship began, it appeared that Rayner and Lujan were intent on looting MBE for their own personal ga in, by diverting the company’s assets to BMR, in which appellant s had no ownership interest. The receiver prevented this from happening. Because of the receiver’s investigation and recommendation, Rayner and Lujan were removed from managing the company,15 prevented from competing with it, and Hellyar was placed in charge under the receiver’s control. Further, while the receiver was unabl e to restore the busine ss to profitability, he successfully interrupted the damage to oper ations and destructi on of goodwill occurring under Rayner’s and Lujan’s manageme nt. This benefitted appellants. Thus, the trial court’s decision to hold th e individual parties, including appellants, responsible for the receiver’s fees and costs, is supported by California case law. In

Andrade v. Andrade (1932) 216 Cal. 108, 110, the California Supreme Court explained that “[a]s a general pr oposition the costs of a receivership are primarily a charge upon the property in the receiver’s posse ssion and are to be paid out of said property. However, this is not an invariable rule. In many case s a direct liability is imposed upon the parties to the action, or upon some of them, for the remuneration of the receiver. Such direct liability may result from an irregul arity in the appointment, in sufficiency of the property, agreement of the parties, etc.” The cour t cited an earlier California Supreme Court opinion, Ephraim v. Pacific Bank (1900) 129 Cal. 589 ( Ephraim ), in which the court stated the same proposition. Ephraim concerned a property dispute. The plaintiffs, the Pacific Bank and its trustees and directors, sued Madera Fruit and Land Company with respect to certain “lands and premises.” At the plaintiffs ’ request, the court appointed a receiver. However, prior to the plaintiffs’ commencemen t of the action, anot her bank had initiated foreclosure proceedings based on a mortgage it held on the contested property. The foreclosing bank obtained a judgment of foreclosure and sale, and subsequently purchased the property. The plaintiffs dism issed their suit. Sometime later, the court settled and approved the receiver’s account. A lthough the plaintiff Pacific Bank had been declared insolvent, its trustees and director s still had custody and control of the bank’s

funds and assets. The receiver filed a clai m against Pacific Bank and its trustees and

directors to recover the cost s of the receivership. ( Ephraim, supra, at pp. 590-591.) The plaintiffs argued that since the receiv er had not collected his fees out of the property, he had no right to collect agains t the parties to the original suit. The Ephraim court rejected this argument, explaining: “I t is unquestionably the general rule that the16 costs of a receivership are primarily a charge upon the fund in his possession, and are to be paid out of that fund. But it is by no mean s the rule that a receiv er must in all cases

look to that fund fo r his reimbursement, and has no othe r remedy if for any reason that fund is not available.” ( Ephraim, supra, at p. 592.) Citing a treatise, the court continued: “ ‘But it may sometimes happen that a direct liability is imposed up on the parties to the action, or upon some of them , for the remuneration of the re ceiver. This may result from the irregularity of the appointm ent, or from the insu fficiency of the fu nd, or out of the agreement between the parties.’ ” ( Ibid. )

In Ephraim , because of the preexisting lien a nd mortgage on th e property, the mortgagee was entitled to full payment of the foreclosure judgment out of the proceeds of the sale of the property, and “the right of the receiver attached onl y to the surplus. If there should be no surp lus, there was an ‘insufficiency of the fund,’ which authorized [the receiver] to look to the parties in the action for his remuneration.” ( Ephraim, supra, at p. 593.) The receiver was authorized to seek payment for the r eceivership costs and fees from Pacific Bank, and the trustees and directors of the bank who had initiated the suit and sought the appointment of a receiver. ( Id. at p. 595.) We acknowledge the Ephraim court also suggested the receiver co uld properly seek remuneration from the plaintiffs because the foreclosing bank’s righ ts to the property rendered the receiver’s appointment unauthorized. ( Id

. at p. 592.) It is undisputed that the receiver’s appointment in this case was au thorized. However, we still find applicable the principle

set forth in Ephraim , namely that the receiver is entitled to be compensated for his or her services and reimbursed for expenses, and when the receivership fu nd is insufficient, there are circumstances in which it is equita ble and appropriate for the court to allow the receiver to seek payment from the partie s who benefitted from the appointment. ( Id. at pp. 593-594.)17 Here, due to the insufficiency of the fund and the attendant circumstances, the trial court could reasonably hold appellant s liable for the receiver’s costs. 7 Appellants not only requested the receivership, they opposed its termination, even af ter the receiver filed reports describing the dire financial situati on of the business, and in the face of the receiver’s eventual support for an order term inating the receivership. Appellants did not object to the receiver’s continued service or criticize his performance until he filed his final report. Although in their opposition to the final report, and again on appeal, appellants faulted the receiver for defending la wsuits against BMR, or for having unpaid sales taxes and assessments, the receiver ha d alerted the parties to these issues much

earlier. For example, in the receiver’s Octobe r 2011 liabilities repor t, he identified significant Board of Equalization assessme nts for periods before and during the receivership. Despite this and other signifi cant liabilities identifie d in the report, in December 2011, appellants opposed a motion to terminate the receivership, arguing the business could be profitable, and the receiver had provided adequate reporting. Indeed, they asserted: “The Receiver’s last report f iled on October 5, 2011 could not be any clearer in describing the Receivership estate a nd the status of the business.” And, even after the receiver began notifying the par ties and the court that he would seek remuneration from the parties, appellants did not object to the interim reports, or assert the receiver was “running MBE into the ground ,” until the receiver sought to settle the

account.

7 Of course appellants alone are not re sponsible for the fees; Lujan, Rayner, and Leiva are equally responsible. Appellants conte nd that to the extent the court was to hold individual parties liable for the costs of th e receivership, the court should have required only Lujan and Rayner to pay. It is true that the court, in its discretion, may require payment from the parties whose conduct necessitated the receivership. ( Luchs v. Ormsby (1959) 171 Cal.App.2d 377, 389.) However, the court is not required to do so, and may apportion receivership costs in a different manner. ( Baldwin v. Baldwin (1947) 82 Cal.App.2d 851, 856.)18 Moreover, beginning in February 2011, He llyar was managing the business under

the receiver’s control. The trial court could reasonabl y conclude Hellyar was well acquainted with the receivership business’s affa irs. Hellyar twice opposed termination of the receivership after he was authorized to run the r eceivership business. Although the

record does not reveal the level of Hemarata natorn’s involvement in or familiarity with the business’s operations, the court could reas onably conclude that given his alignment with Hellyar, he too was inform ed to some degree about the st ate of the business, beyond the information contained in the receiver’s reports. 8 In addition, while in opposing the motion to terminate the receivership appella nts at one point argued the receiver had suggested a willingness to allow MBE to pay the receivership costs on a payment plan, Hellyar subsequently unilaterally placed MBE in bankruptcy, rendering any payment from the receivership business impossible with out resort to proceedings in bankruptcy

court. 9 Under the totality of circumstance s, the trial court could hold appellants responsible for the receivership costs, w ithin the confines of California law. We disagree that Atlantic Trust Co. v. Chapman (1908) 208 U.S. 360 ( Atlantic

Trust ), mandates a different resu lt in this case. In Atlantic Trust , the high court concluded the lower court erred in holding th e party who requested a receiver responsible for the receiver’s fees solely because the receivership prope rty was insufficient to cover the expenses of the receivership. 10 ( Id. at pp. 375-376.) However, the court also

8 In addition to Hellyar and Hemaratana torn’s alignment and cooperation in the litigation, Hellyar testified that Hemaratanato rn had loaned him m oney for other business ventures; Hemaratanatorn also loaned He llyar money to use as a down payment on a house.

9 This act violated the court’s second or der appointing a receiver which provided: “No one other than the Receiv er has authority to file any voluntary ba nkruptcy petition on behalf of MBE.” When Hell yar filed the bankruptcy petition, the receivership had not yet terminated, due to the failure of any part y to make the required $250,000 payment.

10 Atlantic Trust was not necessarily applying California law. The case was decided in 1908, well before the court’s decision in Erie R.R. v. Tompkins (1938) 304 U.S. 64,19 acknowledged the “rule that cases may arise in which, because of their special circumstances, it is equitable to require th e parties, at whose instance a receiver of property was appointed, to meet the expenses of the receivership, when the fund in court is ascertained to be insufficient for that purpose.” ( Id. at p. 375, italics added.)

In Baldwin v. Baldwin

, supra, 82 Cal.App.2d 851, the cour t explained a fundamental principle regarding receivership costs under Ca lifornia law: “Each case of this kind must, of necessity, rest upon its own facts . . . . ‘Courts generally are vested with large discretion in determining who shall pay the cost and expenses of receiverships. The court may assess the costs of a recei vership against the fund or pr operty in receivership or against the applicant for the receivership, or it may apportion them among the parties, depending upon the circumstances.’ ” ( Id. at p. 856.)

and the development of the “Erie doctrine,” wh ich established that a federal court sitting in diversity jurisdiction will apply the substa ntive law of the relevant state. (See 19 Wright, Miller & Cooper, Fed. Prac. & Proc. (2d. ed. 1996) Jurisd iction, § 4502, p. 7 [before Erie , and under Swift v. Tyson (1842) 41 U.S. 1, “decisions of state courts on matters of commercial law . . . could be disreg arded by the federal courts in favor of the general principles and doctrines of comme rcial jurisprudence. In effect, the Swift decision gave the federal courts great fr eedom to develop uniform principles of substantive law in areas neither covered by st ate statutes nor involving real estate or similarly ‘local’ matters .”].) Thus, while the Atlantic Trust case was app ealed from the Ninth Circuit, and the cour t cited (and distinguished) Ephraim , the court also relied on state cases from several other jurisdictions , including Minnesota, North Dakota, and Oregon. ( Atlantic Trust , at pp. 373-374, 376.) This does not render Atlantic Trust necessarily inapplicable, as many other case s from the period, including California cases, cited authorities from other states , and the underlying principles remain relevant today. However, we disagree with ap pellants’ implication that Atlantic Trust is binding precedent in a California court. Atlantic Trust ’s utility is as a potentially persuasive, not binding, authority. (See Brakke v. Economic Concepts, Inc. (2013) 213 Cal.App.4th 761, 770 [decisions of federal courts in matters of state law are not binding on state courts, but may be persuasive]; People v. Guiton (1993) 4 Cal.4th 1116 , 1126 [decision by U.S. Supreme Court based solely on federal la w is not binding on a California court’s interpretation of state law].)20 We also find persuasive the reasoning of the court in Bowersock Mills & Power Co. v. Joyce (8th Cir. 1939) 101 F.2d 1000, which involved ci rcumstances similar to

those here. In Bowersock , the appellant cross-complained against a broker in a business dispute. The broker had agreed to distribute the appellant’s products in multiple states. The appellant sought a receiver to recover its products in the broker’s possession or control, and to prevent the disposition of th e products in a way that would injure the appellant’s business. ( Id. at p. 1001.) The court appointed a receiver. Eventually it became apparent that the expense of recove ring and assembling the appellant’s products was “out of proportion to their value,” but the appellant wished the receiver to continue anyway. ( Ibid. ) Eventually the parties settled the matter. The receiver filed a final report. The receiver’s requested compensatio n exceeded the monies in the receivership fund. The court ordered the appellant to pay the receiver’s compensation. ( Id. at p. 1002.) The appellant argued the r eceivership expenses were chargeable only against receivership funds. The Court of Appeals disagreed. Alth ough the court acknowledged the general rule that a receiver’s expenses and compensation are to be charged only against the receivership fund and not against the party who procured the receiver’s appointment, it also explained that “[e]quitabl e considerations have created exceptions to these general rules, and it is recognized that there is a discretion in the court appointing the receiver as to who shall be charged with the costs of the receivership.” ( Bowersock,

supra, at pp. 1002-1003, fn. omitted .) The court noted the appella nt sought the receiver’s appointment, the receivership was created for the appellant’s benef it and protection, and the intention of the appellant and the court was that the receivershi p would continue until the underlying controversy was tried and reso lved. The court continued: “There is nothing in the record to su ggest that the receivership was not conducted in accordance with the wishes of the appella nt, and nothing to show that , at any time, the appellant suggested a termination of the receivership, although it must have known that the expense of recovering this widely scattered and de teriorated merchandise would be out of proportion to its value.” ( Id. at pp. 1003-1004.)21 The court thus concluded: “Because th e court, in creating this temporary receivership, did exactly what the appellant as ked it to do, and did it for the sole benefit of the appellant and to protect its business and good will, and because the appellant had as much knowledge as anyone about the value of these deteriorated products which the receiver was to collect and dispose of, we have, with some hesitation, reached the conclusion that the order compla ined of should be sustained in so far as it requires the appellant to pay the allowances made to the receiver and his attorn ey in excess of the balance of the receivership fund.” ( Bowersock

, supra , at p. 1004.) The facts here are analogous, and we find no clear abuse of discretion in the trial court’s ruling holding the indivi dual parties jointly and severa lly liable for the receiver’s

fees and costs. The fund was insufficient to satisfy the receivership expenses. Appellants sought the receivership in the fi rst instance and repeatedly ar gued against its termination, even when it was apparent the receivership business had significant debts and liabilities. The receivership inured to their benefit b ecause the receiver managed to halt Rayner’s and Lujan’s waste and looting of the business’s assets. As of Februa ry 2011, Hellyar was managing the business under the receiver’s control; the trial court could reasonably conclude he, and Hemaratanato rn who was closely aligned w ith him, knew as much as anyone about the busine ss’s financial standing and prospects. In addition, the record comp letely fails to support appellants’ contention, voiced strenuously at oral argument in this case, th at the receiver’s performance or conduct in operating the receivership was in any way improper, or that he was derelict in his duties

as an officer of the court. As noted ab ove, appellants had no complaints about the receiver’s performance until he filed his final re port with the court, which sought to hold all of the parties jointly and severally liable fo r the receivership fees and costs. Only then

did Hemaratanatorn criticize so me of the receiver’s actions , despite previously praising the receiver’s performance. The record indi cates the trial court could reasonably accept the receiver’s analysis and rationale for taki ng certain actions, such as defending against22 lawsuits against BMR. 11 Appellants now fault the rece iver for failing to seek to terminate the receivership earlier, or for fa iling to request guarantees for payment. Yet this argument ignores that in Decemb er 2011, approximately one year after Hemaratanatorn successfully asked the court to expand the receiver’s powers, and over eight months before the final report, the rece iver supported Rayner’s motion to terminate the receivership; the same month he explicitly st ated in an interim report that he could no longer continue to serve unless the parties provided for payment of the receivership’s “substantial unpaid costs of administration”; a nd later that month he informed all parties

he intended to ask that the individuals be held jointly and severally responsible for the receivership fees and costs. We reject a ppellants’ contention that, in balancing the equities, the court erred in failing to consider alleged deficient performance on the part of

the receiver. We are not unsympathetic to appellants’ arguments that it would have been equitable to require only the other parties to pay the receivership expenses. However,

that the court could have assessed the receiv ership costs differen tly does not mean the option it chose was an abuse of discretion. “W e could . . . disagree with the trial court’s conclusion, but if the trial court’s conclusion was a reasonable exercise of its discretion,

we are not free to substitute our discre tion for that of the trial court.” ( Avant! Corp. v. Superior Court (2000) 79 Cal.App.4th 876, 881-882.) For the reasons explained above, the trial court’s decision to include appellants as parties liable for the receiver’s costs and

fees was in line with establishe d relevant legal principles. ( Horsford v. Boar d of Trustees

11 At the hearing on the final report, th e receiver explained the argument that he should not receive fees for defending against lawsuits ag ainst BMR, “disregards the nature of the entities and their business, and I don’t think anybody in this courtroom can legitimately dispute that BMR and MBE were th e alter ego of one another.” The receiver stated BMR and MBE were one and the sa me, and anyone “who obtained a judgment from BMR would not have required a great deal of work or effort to add MBE and its assets to that judgment.” Aside from th e argument regarding fees for work on BMR, appellants declined to offer any specific ar guments challenging the reasonableness of the receiver’s fees, despite the trial court’s indi cation that it would entertain such arguments in detail.23 of California State University (2005) 132 Cal.App.4t h 359, 393-394.) We find no abuse

of discretion.

DISPOSITION

The trial court order is affirmed. Re spondent to recover his costs on appeal.

BIGELOW, P. J.

We concur:

FLIER, J.

GRIMES, J.