Filed 2/24/21 Razuki v. Malan CA4/1

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

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purposes of rule 8.1115. 

COURT OF APPEAL, FOURTH APPELLATE DISTRICT

DIVISION ONE

STATE OF CALIFORNIA

SALAM RAZUKI,

Plaintiff and Respondent,

v.

NINUS MALAN et al., 

Defendants and Appellants.

 D075028

 (Super. Ct. No. 37-2018-

000034229-CU-BC-CTL)

APPEAL from an order of the Superior Court of San Diego County, 

Eddie C. Sturgeon, Judge. Affirmed. 

G10 Galuppo Law, Daniel T. Watts and Louis A. Galuppo; Noonan 

Lance Boyer & Banach, James R. Lance and Genevieve M. Ruch for 

Defendants and Appellants Ninus Malan, San Diego United Holdings Group, 

LLC, Flip Management, LLC, Balboa Ave Cooperative, California Cannabis 

Group, and Devilish Delights, Inc. 

Goria, Weber & Jarvis and Charles F. Goria for Defendants and 

Appellants Chris Hakim, Mira Este Properties, LLC, and Roselle Properties, 

LLC. 
2

Law Offices of Steven A. Elia, Steven A. Elia, Maura Griffin and James 

Joseph; Williams Iagmin and Jon R. Williams for Plaintiff and Respondent. 

Defendants Ninus Malan and Chris Hakim (and related entities) 

appeal from an order imposing a receivership over two cannabis businesses:

a retail dispensary and a production facility. The trial court imposed the 

receivership after Salam Razuki sued the defendants, alleging he had 

interests in the businesses and defendants were diverting money owed to 

him. The manager of the cannabis businesses, SoCal Building Ventures, LLC 

(SoCal), intervened in the lawsuit and also requested the receivership. The 

court imposed the receivership pending the resolution of the many disputes 

among the parties in the litigation. 

Defendants assert numerous challenges to the court’s receivership 

order. We determine the court acted within its broad discretion and its legal 

rulings were supported by applicable law. We thus affirm. 

OVERVIEW

The proceedings leading to the receivership followed a chaotic and 

procedurally confusing path before three different trial court judges, and 

involved thousands of pages of conflicting documentation about the parties’

activities and their investments in the real property where these all-cash 

businesses operated. The allegations included accusations that money and 

equipment had been stolen from the businesses and claims that Malan’s 

counsel and the receiver had committed malfeasance. 

Razuki and Malan’s business relationship began with commercial real 

estate investments in 2009, and eventually expanded into several cannabis 

businesses. By 2017, however, the relationship was strained, and they 

entered into a settlement agreement to clarify their ownership of and rights 

to the expected profits from three cannabis businesses: (1) A retail
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dispensary located on Balboa Avenue (Dispensary); (2) a production facility

located on Mira Este Court (Production Facility); and (3) a planned cannabis 

cultivation facility to be located on Roselle Street (Planned Facility). Malan 

owned the entity that held title to the Dispensary property, and Malan and 

Hakim both owned shares in the entities that held title to the Production and 

Planned Facilities properties. Razuki claimed interests in these businesses 

through his relationship with Malan. 

After the settlement agreement, Malan and Hakim contracted with 

SoCal to manage the Dispensary and the Production Facility. This contract

provided SoCal with options to purchase interests in the businesses. In May 

2018, Razuki learned from SoCal that Malan had allegedly failed to disclose 

profits to him, and SoCal learned that Razuki claimed an interest in the 

Dispensary and Production Facility properties and/or businesses. After 

SoCal questioned Malan and Hakim’s rights to option the properties, they 

unilaterally terminated SoCal’s management agreements and locked SoCal 

out of both facilities. 

Two months later, Razuki filed the complaint against Malan, Hakim, 

and numerous entities formed to operate the three cannabis businesses

(detailed below). Within days, Razuki brought an ex parte application 

requesting the appointment of a receiver over the three businesses and SoCal 

filed an ex parte request to file a complaint in intervention against the same 

defendants. SoCal also joined Razuki’s request for a receiver. These filings

opened two months of intense litigation concerning the appointment of a 

receiver, generated thousands of pages of briefing, declarations, and exhibits,

and resulted in five hearings before three different judges: Judge Kenneth 

Medel (who initially appointed the receiver and was peremptorily 

challenged); Judge Richard Strauss (who vacated the receiver and was 
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peremptorily challenged); and Judge Eddie Sturgeon (who appointed the 

receiver in the challenged order). 

After the matter was assigned to Judge Sturgeon, the parties filed 

voluminous documentation describing wildly different versions of events and 

competing theories of ownership of the businesses. Judge Sturgeon 

reinstated the receiver temporarily over the Dispensary and Production 

Facility, but not the Planned Facility, and set another hearing to confirm the 

appointment. By the time of that hearing, the court had before it evidence 

showing Razuki’s significant investment into the businesses at issue; 

multiple competing claims on the ownership of the assets; at least one 

separate pending lawsuit to quiet title over the Dispensary; and allegations 

that Malan and his counsel had directed Dispensary employees to abscond 

with thousands of dollars in cash after Judge Medel’s initial order appointing 

the receiver. After an extensive hearing, on September 26, 2018, Judge 

Sturgeon ordered the receiver to remain in place for an additional 60 days.

Malan and Hakim (and related entities) now appeal from this order.1 

Malan contends (1) technical errors in the procedure for the 

appointment of the receiver require reversal; and (2) his 2017 settlement 

agreement with Razuki is unenforceable as against public policy because its 

subject matter, the sale of cannabis, was unlawful when the agreement was 

1 On November 16, 2018, after the notices of appeal were filed and before 

any briefing, federal officers arrested Razuki for plotting to hire a hitman to 

kidnap and murder Malan in Mexico to put an end to this litigation. At the 

time of the briefing, Razuki awaited trial on federal charges of conspiracy to 

murder and kidnap Malan. As explained below, these facts occurred after the 

challenged September 26 receivership order and thus are not before us in 

deciding the propriety of this order. But these facts would be relevant to any 

further court orders in this case. 
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made. Malan and Hakim both assert (1) the unclean hands doctrine 

precludes the equitable receivership remedy; (2) Razuki lacked standing 

under the receivership statute to pursue his claims; and (3) appointment of 

the receiver must be reversed because Razuki failed to show a probable right 

of possession of the assets, that the balance of harms supported the 

appointment of a receiver, or that a less drastic remedy was not available. 

Hakim’s arguments concern only the appointment of the receiver over the 

Production Facility because he claims no ownership interest in the 

Dispensary.

As we shall explain, the trial court’s discretion to appoint a receiver at 

this preliminary stage of litigation is broad, and to “justify our interference, it 

must clearly appear that the appointment was an arbitrary exercise of 

power.” (Maggiora v. Palo Alto Inn, Inc. (1967) 249 Cal.App.2d 706, 711

(Maggiora).) Applying this standard, we reject appellants’ arguments that 

the trial court abused its discretion. We also determine appellants’ other 

contentions lack merit and affirm the receiver appointment. 

FACTUAL AND PROCEDURAL BACKGROUND

The contours of the relationship between Malan and Razuki are not 

clearly spelled out in the record before this court. Their declarations show 

the business relationship began around 2009 and that Razuki initially hired 

Malan to manage his struggling Chula Vista commercial shopping center, 

followed shortly after by another commercial property. Malan excelled in this 

role, and Razuki brought him into his real estate investment business, 

partnering with Malan on the purchase, sale, and rental of commercial 

properties. 

Eventually, the two became partners in the cannabis businesses which

ultimately led to this litigation among Razuki, Malan, Hakim, and the 
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various entities. The proceedings leading to the receiver appointment were 

lengthy and factually disputed. To properly evaluate the appellate 

contentions, we describe in some detail the facts and procedure leading to the 

appointment.

A. Allegations in Razuki’s First Amended Complaint

On July 13, 2018, three days after filing his initial complaint, Razuki 

filed an amended complaint against Malan and Hakim and the various 

entities owned or controlled by them. These entities fall into three 

categories: (1) the entities holding title to the property where each of the 

three marijuana businesses was located2; (2) entities created to hold title to 

the required state licenses for each business3; and (3) the entities created to 

serve as the operating entity for all the cannabis operations (Flip 

Management, LLC (Flip) and Monarch Management Consulting (Monarch). 

These three category of entities will be collectively referred to as the Related 

Entities. The first category entities will be referred as the Property Owner 

entities. 

2 These entities are (1) San Diego United Holding Group, LLC (SD 

United), property owner of the Dispensary location; (2) Mira Este Properties, 

LLC (Mira Este), property owner of the Production Facility location; and (3) 

Roselle Property, property owner of the Planned Facility location. Malan was 

the sole owner of SD United, and Malan and Hakim held equal interests in 

the other two property-owning entities. 

3 These entities are Balboa Ave Cooperative (Balboa Co-Op) for the 

Dispensary; California Cannabis Group (CCG) for the Production Facility; 

and Devilish Delights, Inc. (Devilish) for the Planned Facility. The licenses 

were required under state laws that closely regulate cannabis businesses. 

(See Bus. & Prof. Code, § 26000 et seq.) Cities and counties also regulate 

these businesses through their land use and police powers, including through 

conditional use permits (CUP). (See id., § 26200, subd. (a)(1).) 
7

In the amended complaint, Razuki alleged that when he and Malan 

decided to enter the cannabis industry as partners, they had an oral 

agreement that “Razuki would provide the initial cash investment to 

purchase a certain asset while Malan would manage the assets. The parties 

agreed that after reimbursing the initial investment to Razuki, he would be 

entitled to seventy-five percent (75%) of the profits & losses of that particular 

asset and Malan would be entitled to twenty-five percent (25%) of said profits 

& losses.” 

According to the complaint, the oral agreement between Razuki and 

Malan faltered in early 2017, when the entity that held property ownership of 

the Production Facility (Mira Este) required additional capital for 

renovations. Malan was able to secure a $1.08 million loan based in part on 

Razuki’s personal guarantee and real property collateral. According to 

Razuki, however, the proceeds of the loan were not used on improvements to 

this property, but were instead taken by Malan and Hakim for their personal 

use. 

On November 9, 2017, Razuki and Malan entered into a written

agreement to settle their interests titled “Agreement of Compromise, 

Settlement, and Mutual Release” (Settlement Agreement). The Settlement 

Agreement required the transfer of the partnership assets to a new entity, 

RM Property Holdings, LLC (RM Property). The agreement describes the 

partnership assets as consisting of various portions of the three Property 

Owner entities and Flip, and Razuki’s minority interests in two additional 

assets (Sunrise Property Investments, LLC (Sunrise) and Super 5 

Consulting Group, LLC (Super 5)). The Agreement states Razuki and Malan 

“hereby reaffirm and acknowledge the terms of the Operating Agreement [for 

RM Property] provide for the repayment of the Partner’s Cash Investment
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prior to any distribution of profits and losses. The Parties further reaffirm 

that once the partner’s cash contribution has been repaid by the Company, 

then Razuki shall receive [75%] of the profits and losses of the Company and 

Malan shall receive [25%], all as set forth under the terms of the Operating 

Agreement.” 

Under the Settlement Agreement, Razuki and Malan had 30 days to 

make their best efforts to transfer these assets to RM Property and to 

perform an accounting of their cash investments in those assets. Razuki 

alleges that Malan asked for additional time to perform the accounting and 

also contracted with SoCal to serve as the operator for the cannabis

operations at the Dispensary, the Production Facility, and the Planned 

Facility. 

The SoCal management agreements gave SoCal the right to retain all 

revenue from the businesses in exchange for a guaranteed monthly payment 

to Monarch (formed to serve as an operating entity for all cannabis 

operations). Razuki alleged that although the agreements required payment 

to Monarch, Malan did not disclose the existence of Monarch to Razuki. 

Instead Malan told Razuki that SoCal’s monthly payments would be 

deposited into accounts of Flip (the other operating entity) or the Property 

Owner entities. Also allegedly unknown to Razuki, the management 

agreements gave SoCal an option to purchase a 50 percent interest in each of 

the Property Owner entities. 

In January 2018, Malan notified Razuki that he was close to 

completing the sale of the three Property Owner entities to SoCal and that 

transferring the assets to RM Property, as required by the Settlement 

Agreement, would unnecessarily complicate the sale. From January to May 

2018, Malan represented he was continuing to negotiate the sale of the 
9

Property Owner entities to SoCal and that Razuki would receive 75 percent of 

Malan’s share of the sale proceeds. During this time, Razuki asked for an 

accounting of the businesses and Malan told him none of the operations were 

profitable. 

Then, in the second week of May 2018, Razuki met with SoCal’s 

principal, Dean Bornstein. Bornstein told Razuki that SoCal had been 

making monthly payments to Monarch and that the Dispensary and the 

Production Facility were both profitable. As a result of this conversation, 

Razuki believed Malan was hiding profits and trying to eliminate Razuki

from the businesses. After the meeting, SoCal also became suspicious of 

Malan and Hakim because SoCal was previously unaware of Razuki’s 

claimed interest in the properties. As a result, SoCal sent a letter to Malan 

requesting confirmation of his ownership of the three Property Owner 

entities, and also indicating that SoCal wished to exercise its purchase 

options. 

On July 9, Malan allegedly withdrew $24,028.93 from RM Property’s

bank account that had been deposited by Razuki, changed the locks at the 

Dispensary, and changed passwords for the Dispensary’s security systems. 

During the next two days, Malan and Hakim terminated SoCal’s 

management agreements, renamed the Dispensary, and told employees there 

was new management. 

Based on these factual allegations, Razuki asserted numerous causes of 

action against Malan, Hakim and the Related Entities. These claims 

included: breach of the Settlement Agreement, the oral agreement, and the 

good faith implied covenant against Malan; breach of fiduciary duty against 

Malan, Hakim, and Monarch; fraud against Malan; money had and received 

against Flip and the Property Owner entities; conversion against Malan, 
10

Hakim, and Monarch; an accounting claim against Malan and Hakim; 

appointment of a receiver against all defendants; injunctive relief to prevent 

all defendants from selling, transferring, or conveying any asset or property; 

declaratory relief against Malan; constructive trust against Malan and 

Monarch; dissolution of RM Property; intentional interference with 

prospective economic advantage against Malan, Hakim, and the entities 

holding licenses; and intentional interference with a contractual relationship 

against Hakim and Monarch. 

B. Razuki’s Application for Receiver Appointment and SoCal’s 

Application to File Complaint In Intervention 

Three days after the amended complaint was filed, on July 16, Razuki 

filed his ex parte application for the appointment of receiver and preliminary 

injunction. The application sought the appointment of Michael Essary as 

receiver to take possession of the assets of RM Property, and each of the 

Related Entities. 

The same day, SoCal filed an ex parte application to file a complaint in 

intervention. The proposed complaint named the same defendants, repeated 

many of the same allegations, and also sought the appointment of a receiver 

over the Related Entities. SoCal alleged defendants had concealed the 

existence of Razuki’s ownership interest in the three facilities, and 

defendants had violated the management agreements.

According to SoCal’s complaint, after SoCal learned of Razuki’s interest

and questioned Malan and Hakim, Malan informed SoCal that defendants’ 

ownership of the Dispensary was also disputed in a separate pending case in 

San Diego Superior Court. SoCal responded with a request that defendants 

sign a tolling agreement to suspend the option deadlines, but also expressed 

hope the relationship could be salvaged. 
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On July 10 (the day Razuki filed his initial complaint), defendants’ 

counsel sent a letter to SoCal terminating the three management 

agreements, and asserting SoCal was in breach of the agreements for failing 

to make contractually required payments and failing to appropriately 

manage the facilities. By the next day, Malan and Hakim had locked SoCal 

out of both the Dispensary and the Production Facility, and had repainted 

the dispensary and changed its name and signage. SoCal’s complaint alleged 

that defendants “destroyed the facilities’ financial records, receipts, printers, 

barcode scanners, and point of sale tracking information . . . .” 

C. Hearing on Receiver Appointment and Intervention Complaint

The hearing on Razuki’s ex parte application for receivership and on 

SoCal’s ex parte application to file its intervention complaint occurred on 

July 17. During the brief hearing, Razuki’s counsel outlined the basis for the 

requested relief, explaining that Razuki believed Malan and Hakim had 

hidden over $1 million in management fees received from SoCal. He also 

argued a receivership was needed because defendants had violated their

management agreements with SoCal, locking SoCal out of both the 

dispensary and production facility and preventing SoCal from accessing its 

valuable manufacturing equipment. SoCal also joined in the application for a 

receiver. 

Gina Austin specially appeared on behalf of all of the defendants and 

said she had not yet been retained in the matter, and that none of the 

defendants had yet been served with the application for receiver or the 

complaint in intervention. Austin indicated she had briefly reviewed the 

receiver application before the hearing, and argued there was no urgency 

identified that required immediate relief. 
12

The court granted SoCal’s application to intervene and then without

explanation stated it was “going to grant the relief requested. The injunction 

is granted. Receivership is appointed.” The same day, the court issued a 

minute order confirming its rulings and signed a proposed order submitted by 

Razuki, which appointed a receiver over RM Property and the Related 

Entities (encompassing all three businesses). The orders directed both 

Razuki and the receiver to post a $10,000 bond within five days. The orders

also set an August 10 order to show cause (OSC) to confirm the receiver 

appointment. Razuki and the receiver, Essary, submitted proof of the 

requisite undertakings to the court that day. 

D. Malan’s Peremptory Challenge and Motion to Vacate 

Receivership; Razuki’s Ex Parte Application to Reset OSC 

Hearing

The day of the hearing, Malan filed a peremptory challenge. The OSC 

hearing was then vacated and, on July 25 the case was reassigned to Judge 

Strauss. Three days later, on July 28, Razuki filed an ex parte application for 

an order to reset the OSC hearing. Before the court took action on this 

application, Malan filed a competing ex parte application to vacate the 

receivership order. The application also sought a temporary restraining 

order (TRO) to prevent Razuki from “transferring money or disposing of 

property obtained from one of the Defendants since the receivership order 

was issued” or from entering any real property controlled by defendants. 

Malan’s moving papers presented a version of events completely at 

odds with those presented by Razuki and SoCal. Malan asserted that Razuki 

had no ownership interest in the businesses, pointing to grant deeds 

transferring the Dispensary and Planned Facility properties to the two

Property Owner entities (SD United and Roselle). Malan’s declaration stated 

that he and Razuki mutually agreed to rescind the Settlement Agreement in 
13

March 2018 after Razuki was unable to transfer his interests in Sunrise and 

Super 5 to RM Property. Malan alleged that Razuki filed the lawsuit because 

“of a large judgment a litigant obtained against him in another lawsuit, 

which is causing Razuki some cash flow problems.”4 

With respect to SoCal, Malan asserted that in January 2018, the three 

entities holding the medical marijuana licenses (Balboa Co-op, CCG, and 

Devilish) hired SoCal to operate the three properties, but SoCal had

mismanaged the properties. Malan claimed SoCal had poorly controlled

inventory, failed to have sufficient security present and hired a security 

guard not authorized to carry a firearm, failed “to pay employees correctly,” 

and failed to pay required insurance. Malan also asserted SoCal gave 

confidential information to Razuki and withheld payments related to the 

Production Facility property, causing the owner (Mira Este) to default on a 

loan. Malan said SoCal was conspiring with Razuki “to hijack the three 

businesses” by filing this lawsuit.5

Finally, Malan’s declaration detailed dramatic events that unfolded on 

July 17, the day Essary was appointed. Malan stated that after the hearing, 

several SoCal employees, including one carrying a visible gun, accompanied 

Essary to the Dispensary parking lot. Malan said he called the police when 

he saw the “gunman” and when the police arrived at the premises, Essary 

4 Malan also said the homeowners association rules governing the 

Dispensary property prohibit marijuana operations; the association had sued 

on this issue; and that the lawsuit had resulted in a February 2018 

settlement granting a variance to the Property Owner entity (SD United) to 

operate the Dispensary if certain conditions were met.

5 Malan also noted the entity holding title to the Dispensary property 

(SD United) had filed a cross-complaint to quiet title to this property in a 

separate pending case against Razuki.
14

and the SoCal employees “fled.” According to Malan, the employees and 

Essary returned later in the day, “broke down the door and invaded the 

building,” and stole computers and other equipment. Malan stated that 

Essary’s decision to rehire SoCal after his appointment was evidence of

negligence and Essary’s inability to manage the businesses. 

A supporting declaration from Malan’s counsel (Austin) corroborated 

Malan’s statements about the receiver’s takeover of the Dispensary. Austin 

also claimed Essary could not lawfully run the businesses because Essary

was not properly licensed. Austin also said the Dispensary was under audit 

by the City of San Diego and both the Dispensary and Production Facility

had upcoming hearings related to their conditional use permits that would be 

jeopardized by Essary’s involvement. 

SoCal filed an opposition, refuting Malan’s allegations and asserting 

Malan had made material misrepresentations to the court. SoCal stated

Malan falsely claimed Essary had threatened Dispensary employees, when in 

fact those employees had barricaded themselves into the store “so they could 

steal the dispensary’s money in violation of the [receivership] order, and flee 

with bags of ‘loot’ into their attorney’s ‘getaway car.’ ” In support, SoCal 

submitted Essary’s declaration stating that after the July 17 hearing, Austin

told him she was advising her clients not to follow the court’s order and to 

resist any attempt by Essary to take control of the assets. Essary also 

described the scene when he went to the Dispensary, explaining the 

employees locked themselves in a backroom with the safe and security 

cameras, loaded bags with money, and fled out the back door into Austin’s 

waiting car. 
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E. July 31, 2018 Hearing Before Judge Strauss

On July 31, Judge Strauss heard Razuki’s ex parte application to re-set 

the OSC to confirm the appointment of the receiver and Malan’s ex parte 

application to vacate the receivership. Counsel for Malan and the entities 

argued the receivership order was void because Razuki had failed to provide 

proper notice, the receiver had a prior relationship with Razuki and SoCal 

that disqualified him, Razuki had failed to show a sufficient ownership 

interest in the entities, and there was no urgency that supported the drastic 

remedy of a receiver. 

Razuki’s counsel responded that Razuki’s submitted evidence showed 

that Malan was attempting to steal assets from Razuki and SoCal, which had 

invested $2.6 million in equipment and other improvements to the properties. 

SoCal’s counsel asserted there was urgency because Malan had begun to sell 

SoCal’s equipment, and Malan and Hakim had diverted millions of dollars to 

Monarch that was owed to Razuki. SoCal also asserted a receiver was 

necessary because the operators hired by the defendants after SoCal’s 

termination threatened the viability of the businesses and the value of its 

purchase options. 

Near the conclusion of the contentious hearing, Hakim’s counsel 

proposed a compromise, suggesting the court issue an injunction returning 

the parties to the status quo that existed before the receivership order, and 

that prevented any transfer of funds outside the ordinary course of business. 

Counsel suggested Razuki could then bring his request for a receiver again, 

on a noticed motion on shortened time with full briefing and the opportunity 

to submit evidence. The court adopted the proposal and directed Hakim’s 

counsel to prepare a final order. The court declined to set a date to hear a 

new motion, instead instructing the parties “when you’re ready to file 
16

whatever it is you’re going to file, we’ll see what kind of date we can give you. 

And we’ll make it as soon as possible, but I don’t know what that is exactly.” 

The court issued a minute order on July 31 stating the request to 

vacate the receivership was granted and directing “counsel to prepare a 

proposed order for the [c]ourt’s review and approval.” The order also granted 

Essary’s request to employ counsel and “as to all other matters; the [c]ourt

instructs counsel to proceed via noticed motion for remedies being sought.” 

F. Peremptory Challenge and Case Reassignment to Judge Sturgeon

After the July 31 hearing, SoCal filed its peremptory challenge to 

Judge Strauss and the case was again reassigned, this time to Judge 

Sturgeon. On his own motion, Judge Sturgeon scheduled an August 14 

hearing to revisit the appointment of the receiver.6 

On August 10, Razuki filed a “supplemental memorandum of points 

and authorities in support of appointment of receiver and opposition to 

[Malan’s] ex parte application to vacate receivership order.” Razuki argued 

Judge Strauss’s minute order was ineffectual because the court had not 

6 The status of Judge Strauss’s order vacating the receivership was left 

in limbo. On August 7, 2018, Hakim’s counsel submitted a proposed order to 

the court, as directed by Judge Strauss, with a letter to Judge Sturgeon 

explaining the circumstances. Razuki’s counsel represented in a declaration 

filed on August 10, 2018, that Judge Sturgeon’s clerk contacted her on 

August 8, 2018, by telephone and stated that because Judge Strauss had 

directed counsel to prepare an order after the hearing, and no order was ever 

signed, the July 31, 2018 minute order vacating the receivership “did not 

constitute a valid and final order and the receivership was never vacated.” 

Essary submitted a report to the court on August 10, 2018, which stated it 

was his understanding that the order vacating his appointment was never 

made final, and that Judge Sturgeon had scheduled an ex parte hearing on 

August 14, 2018, “to ‘re-hear’ Defendants’ ex parte application to vacate the 

receivership.” 
17

signed any final order after the hearing, and he again argued the merits of 

appointing the receiver. Razuki’s counsel outlined in more detail the 

payments made by SoCal to Monarch that he asserted were misappropriated 

by Malan and Hakim, and described the potential profitability of the 

businesses. 

In support of his supplemental brief, Razuki filed voluminous records 

attached to his and other declarations, showing his specific investments into 

the Dispensary, Production Facility, and Planned Facility properties. For 

instance, Razuki attached evidence that he invested $254,780 for the down 

payment for the Production Facility property and paid $200,000 for the 

operation’s business tax certificate, while Hakim invested $420,000 toward 

the down payment. Razuki also explained that he transferred the 

Dispensary property from Razuki Investments, LLC, his wholly owned entity, 

to the Property Owner entity (SD United) because he did not want to violate 

a settlement agreement he had previously reached with the City after 

another property he owned was charged with operating a dispensary 

unlawfully. That other settlement prohibited Razuki from owning a 

nonpermitted cannabis facility and Razuki feared the Dispensary’s violation 

of the homeowners association rules precluding marijuana operations might 

constitute a violation. 

Malan also filed supplemental briefing, a supporting declaration, and 

his counsel’s declaration. Malan argued the Settlement Agreement was 

unenforceable because it was in violation of public policy and Razuki had not 

shown the medical marijuana businesses covered by the agreement were 

conducted in conformance with the law. Malan also argued that Essary had 

acted illegally by reinstating SoCal as the operations manager and failing to 
18

secure appropriate approval from the state licensing authorities before 

assuming the receivership. 

In his declaration, Malan said that on July 31 (the date of the prior 

order), he witnessed SoCal employees use a moving truck at the Production 

Facility to attempt to steal equipment and an office computer. Malan also 

claimed Essary had stolen $80,000 from the Dispensary. Hakim’s declaration

stated he paid more than one-half the down payment for the Production 

Facility property and that Razuki “was insistent on not wanting to appear of 

record on title in connection with [this] acquisition. . . .” 

Neither Malan’s nor Hakim’s declarations disputed Razuki’s assertions 

concerning his specific ownership interests in the various properties, 

including that he was the source of a large portion of the down payment for 

the Production Facility property and had paid for the $200,000 business tax 

certificate. 

G. August 14, 2018 Hearing

On August 14, the parties appeared before Judge Sturgeon for the first 

time. At the start of the hearing the court rejected the idea that it was 

conducting a rehearing of the prior orders and stated it would hear the 

matter anew on August 20. The parties’ counsel then disputed whether the 

receivership had been vacated at the July 31 hearing because no final order 

had been signed. 

After asking questions about the parties’ documentation, the court 

stated it was not reinstating the receiver, and instead would institute a new, 

temporary order. This order froze all related bank accounts until the next 

hearing (although it allowed certain product purchases) and enjoined the sale 

of the three properties at issue. 
19

H. Briefing for August 20, 2018 Hearing

On August 17, 2018, the parties filed additional briefs and voluminous 

documentation in support of their positions. 

Malan filed a supplemental brief and a 20-page supplemental 

declaration describing additional facts about his relationship with Razuki 

and the financing and prior ownership of the properties owned by SD United

(the Dispensary property owner). Malan also again alleged malfeasance by 

Essary, asserting payments of over $100,000 to “SoCal insiders” and 

thousands of dollars to himself while in control of the businesses’ bank 

accounts. 

Malan continued to refute Razuki’s ownership claims, asserting for the 

first time that SD United purchased the Dispensary property from Razuki in 

March 2017, subject to a $475,000 loan held by Razuki that Malan paid off 

three months later. Malan stated that Razuki abandoned his interest in the 

Dispensary property because his ownership in another dispensary (Sunrise) 

was far more lucrative. Malan stated that SD United purchased five other 

units adjacent to the Dispensary for $1.6 million with financing that did not 

involve Razuki. Malan repeated his prior allegations that he was coerced 

into signing the Settlement Agreement, and that he and Razuki mutually 

agreed to cancel it around January or February 2018. 

Hakim’s supplemental papers pertained mainly to its claims about 

SoCal’s alleged mismanagement and sought to rebut SoCal’s assertions it had 

option rights and rights to its equipment at the facilities. Hakim also noted 

that the Planned Facility was currently occupied by a tenant whose rent 

payments could easily be accounted for. 

Razuki also submitted a supplemental brief in which he claimed Malan 

had immediately violated the court’s order by contacting the bank for one of 
20

the entities, and another declaration with additional documentation showing 

his involvement in the financing of the three properties.

SoCal filed additional declarations in support of its position that a 

receiver was needed and that Essary was qualified to serve as the receiver. 

I. August 20, 2018 Hearing

At the August 20 hearing, the court stated it would not address 

whether the July 31 order vacating the receiver was valid, rather the court 

was “starting fresh.” Razuki’s counsel then outlined Razuki’s interest in the 

three businesses, expressing concern that Malan intended to immediately sell 

the real properties, and asserting Razuki had no confidence a truthful 

accounting could be done, particularly since the businesses were operated 

almost entirely in cash.7 SoCal’s counsel argued a damage award would be 

insufficient to remedy the breaches of its options for the real properties. 

Malan’s counsel repeated his argument that the Settlement Agreement 

was unenforceable as against public policy and also noted RM Property was 

never capitalized. He continued to assert there was no urgency requiring a 

receiver because all the asserted damages could be determined by an 

accounting. He also said that SoCal’s poor management of the Dispensary 

had resulted in a default by the entity Property Owner (SD United) under the 

homeowners association settlement, irreparably harming the business. 

7 Razuki’s counsel also asserted there was some indication that Malan 

and Hakim had given purchase options to Far West Operating, LLC (Far 

West) (which was the operator hired after Malan terminated SoCal in early 

July and was reinstated as the operator after July 31, 2018) and Synergy 

Management Partners, LLC (Synergy) (the company hired after July 31, 2018 

to run the Mira Este production facility) that overlapped with SoCal’s 

options, creating the risk of further litigation and additional need for the 

receiver. 
21

Hakim’s counsel refuted the validity of SoCal’s options and confirmed the 

Planned Facility was not currently a marijuana operation. 

Essary’s counsel explained Essary’s activity during his appointment 

from July 17 to July 31, and refuted defendants’ assertions that Essary had 

not satisfied the regulatory requirements to manage the Dispensary and 

Production Facility operations. 

After the conclusion of arguments, the court imposed a temporary 

receivership and set a further hearing for Friday, September 7 to consider the 

continued need for the receiver. The court stated Razuki had shown a 

likelihood of prevailing on the merits and that there was a risk of irreparable 

harm “based on the amount of money that allegedly ha[d] been put into this 

case.” The court again appointed Essary as the receiver and directed him to 

keep the two existing managers (Synergy and Far West) in place as managers 

of the Production Facility and the Dispensary, respectively. 

The court also entered orders specifying who Essary should hire as the 

accountant for the entities in the receivership. The court ordered Essary to 

file a report on September 5 and ordered the parties to file any additional 

supplemental briefing three days before the hearing. The court excluded the 

Planned Facility from the receivership, but imposed a TRO preventing the 

sale of this property. 

On August 28, the court entered the order appointing Essary as the 

receiver over the Dispensary and Production Facilities, the entity owners of 

these properties, and their license holders. 

J. Briefing for September 7, 2018 Hearing

One week later, Hakim filed another supplemental brief, arguing the 

receivership had already caused irreparable harm to the Production Facility

because producers and manufacturers were unwilling to work with the 
22

business while it was under the control of the receiver. Hakim also asserted 

the new manager (Synergy) could soundly manage the facility and keep 

meticulous records for any required accounting, preventing any harm to 

Razuki. Finally, Hakim argued a $10 million dollar bond was appropriate. 

In his supplemental brief, Malan continued to refute Razuki’s interest 

in the three businesses.8 Malan asserted the receivership was detrimental to 

the businesses and that the receiver had already proven too expensive. 

Malan also continued to allege malfeasance by Essary.

Malan’s declaration outlined additional details about his relationship 

with Razuki, explaining that in 2014 he and Razuki began investing in 

properties together with a 75/25 split in Razuki’s favor, and that they 

purchased 50 properties including a gas station and two marijuana 

dispensaries. Malan stated Razuki then refused to honor their arrangement 

and did not share rent proceeds as they agreed, resulting in the 2017 

Settlement Agreement. Malan repeated his assertion he was tricked into 

signing that agreement and that he and Razuki agreed to rescind it in 

February 2018. Malan also stated for the first time that he and Razuki had 

then agreed to keep the properties they controlled, with Malan taking 

ownership of all of the assets under the control of the receiver. 

Malan’s attorney (Austin) submitted a declaration expressing concern 

over Essary’s decision to hire a partner in the law firm representing SoCal, as 

the receiver’s cannabis expert, rather than her recommended independent 

8 Malan lodged close to 100 exhibits consisting primarily of documents he

asserted showed his control of the three businesses and related properties, 

e.g., cancelled checks, wire transfer receipts, and receipts for various business 

expenses, as well as documents from other lawsuits that allegedly showed 

Razuki’s manipulation of the justice system to gain an advantage in real 

estate dealings. 
23

expert. Austin also said the City’s consultant who conducted an audit of the 

Dispensary had recently discovered an approximate $100,000 discrepancy 

while SoCal was the operator. 

On September 5, Essary submitted his first receiver’s report outlining 

his activity related to the Dispensary and the Production Facility. 

K. September 7 Order Confirming Receiver Appointment for 60 Days

At the September 7 hearing, the parties’ counsel reiterated their 

positions at length. 

Razuki’s counsel emphasized the entirely cash nature of the businesses, 

noting the cash could be easily hidden. Malan’s counsel countered that 

discovery was the proper mechanism for Razuki to obtain financial 

information about the businesses, and that most of the relevant information 

was in SoCal’s possession. Malan’s counsel continued to challenge Razuki’s 

assertion he had invested millions into the businesses, and argued a remedy 

less drastic than a receiver would be more appropriate, such as requiring a 

forensic accountant to assess all of the business accounts and operations. 

Hakim’s counsel focused on the harm resulting if the receiver remained 

in place, emphasizing the inability to attract any producers, and citing the 

uncertainty the property could be sold and the risk that trade secrets would 

be disclosed. Hakim’s counsel also suggested that Razuki’s interest in the 

Production Facility property could be protected by requiring his portion of 

profits to be deposited into a separate account that the other parties could not 

access. 

In response to the court’s inquiry, Essary’s attorney stated he did not 

think the receivership would prevent new producers from contracting at the 

Production Facility and any concern about the disclosure of trade secrets 

could be rectified with a nondisclosure agreement. 
24

After considering the voluminous written record and the parties’ oral 

arguments at the several hearings, the court confirmed its receivership 

decision. The court concluded Razuki had shown a sufficient probability of 

prevailing on his claims, and that based on the documentation submitted to 

the court there was a risk of irreparable harm requiring protection. The 

court appointed Essary as the receiver for an additional 60 days, after which 

it would reconsider the appointment, and ordered Essary to hire an outside 

accountancy firm to conduct a forensic accounting of the Production Facility, 

the Dispensary, and all of the interested parties’ contributions to those 

businesses. The court ordered the receivership to remain over the same 

entities and ordered Razuki to post a bond of $350,000 within two weeks, 

with the existing order remaining in place until the bond was posted, and 

ordered that if the bond was not posted the receivership would be dissolved. 

The court directed the receiver’s counsel to submit a final proposed order. 

On September 13, the receiver’s attorney submitted a proposed order. 

Seven days later, on September 20, Razuki filed notice he had posted the 

receivership bond of $350,000 on September 18. 

On September 26, 2018, the court entered the order challenged in this 

appeal, entitled “Order Confirming Receiver and Granting Preliminary 

Injunction” (the September 26 order). The order confirmed Essary’s 

appointment as receiver over two of the Property Owner entities (SD United 

and Mira Este); three license holder entities (Balboa Co-op, CCG, Devilish), 

and the business manager entity (Flip). The order required Essary to retain 

an independent accountant to conduct “a comprehensive forensic audit of the 

Marijuana Operations, as well as of all named parties in this matter as it 

relates to financial transactions between and among such parties related to 
25

the issues in dispute.” The order excluded the Planned Facility, lifting the 

prior restraining order preventing its sale. 

L. Notices of Appeal From the September 26 Order

Malan, SD United, Flip, and the three license holders (Balboa Co-op, 

CCG, and Devilish) filed their joint notice of appeal from the September 26 

order on October 30, 2018. Hakim and the entities related to the Production 

Facility (Roselle and Mira Este) filed their joint notice of appeal from the 

order on November 2, 2018.9 

DISCUSSION

Malan and Hakim challenge the court’s imposition of the receiver over 

the Dispensary and Production Facility related entities (SD United, Mira 

Este, Balboa Co-op, CCG, Devilish, and Flip).10 Malan raises several errors 

in the process used to appoint the receiver and asserts that Essary is biased

against him. Both appellants argue the court abused its discretion by 

appointing Essary, contending that Razuki did not show a sufficient probable 

interest in the assets placed under receivership and that the balance of 

harms did not favor him. Finally, Malan and Hakim assert the doctrine of 

unclean hands prevents the appointment of a receiver in this case. 

9 Our references to appellate arguments made by Malan and/or Hakim 

includes the entities related to each of these parties in their notices of appeal. 

10 Although the court’s order appointing Essary is styled “Order 

Confirming Receiver and Granting Preliminary Injunction,” neither Malan’s 

nor Hakim’s briefing challenges a preliminary injunction. Rather, appellants 

briefing exclusively seeks reversal of the trial court’s order appointing the 

receiver and return to them of the properties, assets, and companies placed 

under the receiver’s control in accordance with that order.
26

I. Legal and Procedural Standards

A. Receivership Standards and Procedure

The appointment of a receiver is a provisional equitable remedy. The 

receiver’s role is to preserve the status quo between the parties while 

litigation is pending. (Southern California Sunbelt Developers, Inc. v. 

Banyan Limited Partnership (2017) 8 Cal.App.5th 910, 925.) Further, it is 

“ ‘an ancillary remedy which does not affect the ultimate outcome of the 

action.’ ” (Ibid.) 

The court’s role in supervising a receiver cannot be overstated. “ ‘The 

receiver is but the hand of the court, to aid it in preserving and managing the 

property involved in the suit for the benefit of those to whom it may 

ultimately be determined to belong.’ [Citations.]” (Marsch v. Williams (1994) 

23 Cal.App.4th 238, 248 (Marsch).) The receiver is the agent of the court and 

not of any party and, as such, is neutral, acts for the benefit of all who may 

have an interest in receivership property, and holds assets for the court 

rather than the parties. (O'Flaherty v. Belgum (2004) 115 Cal.App.4th 1044, 

1092 (O’Flaherty); see People v. Stark (2005) 131 Cal.App.4th 184, 204; Cal.

Rules of Court, rule 3.1179(a).)11 Put another way, appointment of a 

receiver is a tool for the court to gain control over a chaotic ownership dispute

like the turbulent situation Judge Sturgeon found when he was assigned to 

this case. 

“ ‘In California, a receiver may not be appointed except in the classes of 

cases expressly set forth in the statutes or as authorized under established 

usage of the court's equitable powers.’ [Citations.]” (O'Flaherty, supra, 115 

Cal.App.4th at p. 1092.) Code of Civil Procedure section 564 generally sets 

11 All rule references are to the California Rules of Court. 
27

forth the statutory circumstances under which a receiver can be appointed.12 

(Marsch, supra, 23 Cal.App.4th at p. 248.) Section 564, subdivision (b) states:

“A receiver may be appointed by the court in which an action or proceeding is 

pending, or by a judge of that court, in the following cases,” and then lists 12 

particular circumstances that can support the appointment of a receiver. 

Two of these circumstances are relevant here. First, section 564, 

subdivision (b)(1) states: “(1) In an action by a vendor to vacate a fraudulent 

purchase of property, or by a creditor to subject any property or fund to the 

creditor's claim, or between partners or others jointly owning or interested in 

any property or fund, on the application of the plaintiff, or of any party whose 

right to or interest in the property or fund, or the proceeds of the property or 

fund, is probable, and where it is shown that the property or fund is in danger 

of being lost, removed, or materially injured.” (Italics added.) Second, section 

564, subdivision (b)(9) is a catchall, providing for the appointment of a 

receiver “[i]n all other cases where necessary to preserve the property or 

rights of any party.” 

“The requirements of [section 564] are jurisdictional, and without a 

showing bringing the receiver within one of the subdivisions of that section 

the court's order appointing a receiver is void.” (Turner v. Superior Court

(1977) 72 Cal.App.3d 804, 811.) To invoke the authority of the court to 

appoint a receiver under section 564, subdivision (b)(1), the plaintiff must 

establish by a preponderance of the evidence a “joint interest with [the] 

defendant in the property; that the same was in danger of being lost, removed 

or materially injured, and that plaintiff's right to possession was probable.” 

(Alhambra-Shumway Mines, Inc. v. Alhambra Gold Mine Corp. (1953) 116 

12 Subsequent undesignated statutory references are to the Code of Civil 

Procedure. 
28

Cal.App.2d 869, 873 (Alhambra).) Lack of standing (here alleged to be lack of 

probable possession of the property) to seek a receivership is a jurisdictional 

defect that subjects the action to dismissal. (O'Flaherty, supra, 115 

Cal.App.4th at p. 1095.)

Importantly, “[t]he trial court on the motion for receivership is not 

required to determine the ultimate issues involving the precise relationship 

of the parties. At this stage of the proceedings, nothing more than a probable 

joint or common interest in the property concerned need be shown.” 

(Maggiora, supra, 249 Cal.App.2d at p. 711.) “ ‘Evidence to justify the 

appointment of a receiver may be presented “in the form of allegations in a 

complaint or other pleading, by affidavit or by testimony.” ’ ” (Republic of 

China v. Chang (1955) 134 Cal.App.2d 124, 132, italics removed.) 

Procedurally, the Code of Civil Procedure and the Rules of Court set 

two paths for obtaining a receiver. A party seeking the appointment of a 

receiver can do so either on an ex parte basis, or by noticed motion. Under 

either path, the substantive requirements for appointment of the receiver 

under section 564 are the same. Additional procedural protections, however, 

are required under the Rules of Court when an applicant proceeds on an ex 

parte basis. 

Under rule 3.1175(a)(1), a plaintiff seeking a receiver on an ex parte 

basis, must show by declaration “[t]he nature of the emergency and the 

reasons irreparable injury would be suffered by the applicant during the time 

necessary for a hearing on notice.” In addition, the applicant must show, by 

declarations or a verified pleading, (1) the names and contact information for 

“the persons in actual possession of the property”; (2) “[t]he use being made of 

the property by the persons in possession”; and (3) “[i]f the property is a part 

of the plant, equipment, or stock in trade of any business, the nature and 
29

approximate size or extent of the business and facts sufficient to show 

whether the taking of the property by a receiver would stop or seriously 

interfere with the operation of the business.” (Rule 3.1175(a)(2)-(4).) If any 

of this information is “unknown to the applicant and cannot be ascertained by 

the exercise of due diligence, the applicant’s declaration or verified complaint 

must fully state the matters unknown and the efforts made to acquire the 

information.” (Ibid.) 

In addition to the requirements of rule 3.1175, when an applicant 

proceeds on an ex parte basis, section 566, subdivision (b) requires an 

undertaking in an amount fixed by the court before imposing the receivership 

order. At the ex parte hearing, the applicant must propose specific amounts, 

and the reasons for the amounts proposed, of the undertakings required from 

the applicant by section 566, subdivision (b) and from the receiver by section 

567, subdivision (b). (Rule 3.1178.) 

If a receiver is appointed on an ex parte basis, the matter “must be 

made returnable upon an order to show cause why appointment should not be 

confirmed.” (Rule 3.1176, subd. (a).) The OSC must be set within 15 days, 

“or if good cause appears to the court,” within 22 days of appointment of the 

receiver. (Ibid.) On an OSC, or a noticed motion, the applicant’s moving 

papers must allege sufficient facts establishing one of the statutory grounds 

for the appointment, as well as irreparable injury and the inadequacy of 

other remedies. (Alhambra, supra, 116 Cal.App.2d at p. 873.) The court has 

discretion to require the applicant to post a bond if the receivership is 

confirmed, but unlike at the ex parte stage, the bond is not statutorily 

required. Under section 567, subdivision (b) the receiver must maintain a 

bond under either procedure. 
30

B. Standard of Review

“Where there is evidence that the plaintiff has at least a probable right 

or interest in the property sought to be placed in receivership and that the 

property is in danger of destruction, removal or misappropriation, the 

appointment of a receiver will not be disturbed on appeal.” (Sachs v. Killeen

(1958) 165 Cal.App.2d 205, 213 (Sachs).) “The discretion of the trial court is 

so broad that an order based upon facts concerning which reasonable minds 

might differ with respect to the necessity for the receiver will not be reversed. 

[Citation.] To justify our interference, it must clearly appear that the 

appointment was an arbitrary exercise of power [citation].” (Maggiora,

supra, 249 Cal.App.2d at pp. 710-711; see also Breedlove v. J.W. & E.M. 

Breedlove Excavating Co. (1942) 56 Cal.App.2d 141, 143 [“[W]here a finding, 

based upon conflicting evidence, is to the effect that danger is threatened to 

property or funds, and the appointment of a receiver is made, it is seldom 

that the reviewing court will hold that the lower tribunal has been guilty of 

an abuse of the discretion confided to it.”].) 

II. Procedural Challenges to the Order Appointing Essary

Because of the peremptory challenges and their attendant judicial 

reassignments, the procedure followed in this case did not precisely align 

with the conventional paths laid out by the rules. After Razuki obtained the

initial appointment of the receiver on July 17 on an ex parte basis, the 

confirmation process required by rule 3.1176, subdivision (a) was shortcircuited. Before the receivership could be confirmed through the issuance of 

an OSC, the receivership was vacated by Judge Strauss on July 31. That 

order was then interrupted by SoCal’s peremptory challenge and Judge 

Sturgeon began the ex parte proceedings anew. 
31

Although no order clarified whether the parties were to proceed by way 

of noticed motion or on an ex parte basis, the timeline of events generally 

followed the ex parte and confirmation by OSC procedure set forth in rules 

3.1175 and 3.1176. Of note, at the August 20 hearing, the court stated that 

the next hearing should occur “within 15 to 20 days” and set the hearing for 

September 7 to consider the continuation of the receivership and the bond 

amount that should be required from Razuki. Further, no party filed a 

noticed motion with respect to the appointment of (or request to vacate) the 

receiver. 

A. Failure to Require Undertaking

Malan first asserts that the initial order imposing the receiver issued 

by Judge Medel on July 17 was void because it “did not require an 

undertaking from the applicant before the order would take effect,” and that 

every order thereafter was void as a result. (Italics added.) Malan also 

argues that Razuki failed to post a bond before Judge Sturgeon imposed the 

receivership a second time on August 20, again violating section 566 and 

voiding the September 26 order confirming the receivership at issue in this 

appeal.

Malan’s arguments are not well taken. Section 566, subdivision (b) 

states, “if a receiver is appointed upon an ex parte application, the court, 

before making the order, must require from the applicant an undertaking in 

an amount to be fixed by the court, to the effect that the applicant will pay to 

the defendant all damages the defendant may sustain by reason of the 

appointment of the receiver and the entry by the receiver upon the duties, in 

case the applicant shall have procured the appointment wrongfully, 

maliciously, or without sufficient cause.” As has been described, Razuki 

proceeded by ex parte application. The initial order issued by Judge Medel
32

provided Razuki a five-day grace period. Razuki, however, posted the bond 

the day the order was issued, satisfying the statute’s requirement. 

Even if we were to conclude the initial receivership was invalid because 

it gave Razuki five days to post an undertaking, we do not agree with Malan’s 

contention that the September 26 order is therefore void. 

To advance this argument, Malan relies on Bibby v. Dieter (1910) 15 

Cal.App. 45, which held an order appointing a receiver upon an ex parte 

application without the required undertaking is void and all subsequent

orders arising from that appointment order are void. This case is not 

governed by this rule because the challenged receivership order did not arise 

from the initial appointment order claimed to be void. Instead, after the two 

successful peremptory challenges, Judge Sturgeon made clear he was 

considering the receivership petition anew. The court had the full authority 

to vacate the earlier orders and rule on the petition as a matter of first 

impression. (See, e.g., Wiencke v. Bibby (1910) 15 Cal.App. 50, 53 [“ ‘The 

power of a court to vacate a judgment or order void upon its face is not 

extinguished by lapse of time, but may be exercised whenever the matter is 

brought to the attention of the court. . . . The court has full power to vacate 

such action on its own motion and without application on the part of 

anyone.’ ”]; State of California v. Superior Court (Flynn) (2016) 4 Cal.App.5th 

94, 100 [“Even without a change of law, a trial court has the inherent power 

to reconsider its prior rulings on its own motion at any time before entry of 

judgment.”].) 

Malan alternatively asserts that Judge Sturgeon’s August 20 order 

appointing Essary for the second time was void because it did not require 

another undertaking by Razuki before it took effect. However, Malan does 

not explain why the initial $10,000 bond filed by Razuki was insufficient to 
33

satisfy section 566. While a dispute existed when the case was reassigned to 

Judge Sturgeon about whether that receivership was vacated by Judge 

Strauss on July 31 because no final order was signed, the record shows that 

Razuki’s undertaking remained in place through September 19, 2018, when 

Razuki filed notice he had posted the $350,000 undertaking.13 We presume 

the court was aware of the bond, which satisfied section 566. (See Howard v. 

Thrifty Drug & Discount Stores (1995) 10 Cal.4th 424, 443 [“ ‘We uphold 

judgments if they are correct for any reason, “regardless of the correctness of 

the grounds upon which the court reached its conclusion.” ’ ”]; In re Marriage 

of Arceneaux (1990) 51 Cal.3d 1130, 1133, [“A judgment or order of a lower 

court is presumed to be correct on appeal, and all intendments and 

presumptions are indulged in favor of its correctness.”])14 

B. Failure to Timely Serve First Amended Complaint

In a similar vein, Malan argues that Razuki’s failure to serve 

defendants with the first amended complaint within five days of the July 17 

13 Despite the lack of a final order after the July 31 hearing, the record 

also shows Essary and the defendants treated the receivership as being 

vacated that day. For example, the Dispensary and Production Facility

resumed operations that day without any oversight by Essary. On appeal, no 

party suggests the July 31 order was not effective because it was not final. 

14 Malan also argues the September 26 order violated section 566 because 

it gave Razuki 14 days to post the $350,000 bond ordered on September 7, 

2018. However, there is no bond requirement on the applicant for an order 

confirming the receivership. (§ 566, subd. (b); see § 41:7. Undertakings, 

bonds, receiver’s oath, and related claims, 12 Cal. Real Est. § 41:7 (4th ed.) 

[No similar statutory requirement to file an undertaking where the 

application for appointment of receiver is made on a noticed motion or for the 

confirmation of an order appointing a receiver on an ex parte basis.].) Rather 

a bond may be imposed at the court’s discretion. 
34

order, as required by rule 3.1176(b)-(c), requires reversal of the September 

26, 2018 order. 

Rule 3.1176(b) states that when a receiver is appointed on an ex parte 

basis, service of the complaint, notice of the OSC, and any supporting 

memorandum and declarations “must be made as soon as reasonably 

practical, but no later than 5 days after the date on which the order to show 

cause is issued, unless the court orders another time for service.” Under rule 

3.1176(c), if the applicant fails to “exercise diligence to effect service upon the 

adverse parties as provided in (b), the court may discharge the receiver.” 

Razuki provided the trial court with a reasonable explanation for the 

delay in serving the first amended complaint. He explained he was unable to 

obtain a conformed copy from the court’s business office because of its backlog 

and that after the case was reassigned to Judge Strauss, his ex parte hearing 

to obtain an order from the court to require the court’s business office to 

expedite return of the conformed pleading was taken off calendar. Razuki 

explained to the trial court that after the case was reassigned, he obtained a 

new ex parte hearing before Judge Strauss to expedite processing of the 

complaint. This evidence established Razuki’s diligence in attempting to 

serve defendants. Further, any error was mooted by Judge Strauss’s July 31 

order vacating the receiver and Judge Sturgeon’s August 14, 2018 order 

declining to reinstate Essary. Malan’s argument does not support reversal of 

the September 26 order. 

C. Failure to Schedule OSC Hearing Within 22 Days of July 17 Order

Malan also argues the court’s failure to make the OSC returnable 

within 15 days of the July 17 order appointing Essary, as required by rule 

3.1176, voids the receivership. This argument lacks merit. 
35

Rule 3.1176(a) requires the OSC to “be made returnable on the earliest 

date that the business of the court will admit, but not later than 15 days or, if 

good cause appears to the court, 22 days from the date the order is issued.” 

(Rule 3.1176 (a).) At the time it instituted the first receivership on July 17, 

the court did set the hearing on the OSC outside the rule time. The OSC, 

however, was vacated after Malan filed his peremptory challenge to Judge 

Medel, mooting the purported violation of rule 3.1176(a). Further, Malan has 

provided no legal authority or argument to support his assertion that this 

technical error requires reversal of the later receivership order that is before 

this court on appeal.15 (See Mansell v. Board of Administration (1994) 30 

Cal.App.4th 539, 545-546 (Mansell) [appellate court need not furnish 

argument or search the record to ascertain whether there is support for 

appellant's contentions].) 

III. Receiver’s Alleged Bias and Rule 3.1179(b)

Malan next contends that Essary was improperly biased against him 

and that Razuki and Essary violated rule 3.1179(b), which prohibits a 

receiver from making an agreement with the party seeking the receiver to 

hire particular service providers. Razuki responds that the trial court 

considered these allegations, and properly rejected them in view of all of the 

evidence. 

Rule 3.1179(b) states: “The party seeking the appointment of the 

receiver may not, directly or indirectly, require any contract, agreement, 

15 Malan’s assertion that the court violated rule 3.1176(a) at the August 

20 hearing by setting the next hearing to confirm its appointment of Essary 

18 days later is also without merit. The hearing was within the rule limit of 

22 days and Malan does not challenge the existence of good cause to set the 

hearing beyond 15 days. 
36

arrangement, or understanding with any receiver whom it intends to 

nominate or recommend to the court, and the receiver may not enter into any 

such contract, arrangement, agreement, or understanding concerning: [¶] 

(1) The role of the receiver with respect to the property following a trustee's 

sale or termination of a receivership, without specific court permission; [¶] 

(2) How the receiver will administer the receivership or how much the 

receiver will charge for services or pay for services to appropriate or approved

third parties hired to provide services; [¶] (3) Who the receiver will hire, or 

seek approval to hire, to perform necessary services; or [¶] (4) What capital 

expenditures will be made on the property.” (Italics added.) The rule 

contains no remedy for a violation, and does not require the court to void the 

receivership if it is violated. 

The record shows the order issued by the court ensured the receiver 

was exercising independent authority in determining who to hire and how to 

manage the assets. Further, Malan points to no evidence of the existence of 

any agreement or understanding between Razuki and Essary concerning who 

Essary would hire if appointed. The court’s rejection of Malan’s argument 

that there was an agreement between Razuki and Essary that violated rule 

3.1179(b)(3) was not an abuse of discretion. 

With respect to Malan’s assertion that Essary was biased against him, 

Malan points out that the initial July 17 order signed by Judge Medel 

authorized the receiver “to bind the Marijuana Operations to the terms of the 

Management Agreement . . . with SoCal . . . .” This order, however, was 

replaced and is not before this court on appeal. 

The record shows that Judge Sturgeon was careful with respect to 

SoCal’s continued role in the businesses. At the August 20 hearing, and as 

reflected in the court’s written orders, Judge Sturgeon specifically prohibited 
37

Essary from hiring SoCal, instead directing the receiver to keep the new 

managers (Far West and Synergy), who were favored by Malan and Hakim, 

in place as the operators of the Dispensary and the Production Facility. As

the court directed, Essary maintained those entities in place after his August 

20 appointment. There is no support in the record for Malan’s position that 

the court abused its discretion by appointing Essary, that Essary’s actions 

showed bias in favor of Razuki, or that Essary violated rule 3.1179(b) after 

his August 20 appointment.16 

IV. No Abuse of Discretion on Section 564, subdivision (b)(1) Issues

Malan and Hakim both argue in different ways that the court was

required to determine whether Razuki showed a probability of success on the 

merits of his claims. Hakim asserts that “the trial court abused its discretion 

in appointing a receiver because the probability of success at trial between 

Razuki on the one hand and [the Production Facility entities (Mira Este and 

CCG)] on the other hand indisputably favors” these entities. Malan argues 

the Settlement Agreement “is void for violating public policy at the time it 

was created, so [Razuki] has not shown the requisite likelihood of success on 

the merits.” 

To appoint a receiver, however, the trial court was not required to 

determine the probability of success on any particular claim. Rather, as set 

forth above, to invoke the court’s authority to appoint a receiver under section 

564, subdivision (b)(1), a plaintiff seeking a receiver must establish by a 

16 The record does show the cannabis industry in San Diego is relatively 

small and many of the players in this litigation had existing relationships. 

For example, as SoCal argued below, Austin introduced Malan and Hakim to 

her client Jerry Baca, who formed Synergy in late August 2018 with Austin’s 

counsel for the purpose of managing the Production Facility. 
38

preponderance of the evidence a “joint interest with [the] defendant in the 

property; that the same was in danger of being lost, removed or materially 

injured, and that plaintiff's right to possession was probable.”17 (Alhambra,

supra, 116 Cal.App.2d at p. 873; see Maggiora, supra, 249 Cal.App.2d at 

p. 711.) 

Contrary to appellants’ arguments, the trial court was “not required to 

determine the ultimate issues involving the precise relationship of the 

parties. At this stage of the proceedings, nothing more than a probable joint 

or common interest in the property concerned need be shown [citations].” 

(Maggiora, supra, 249 Cal.App.2d at p. 711.) Notably, an interest in the 

profits of a concern is “a significant factor in determining the necessity of a 

receiver [citation]. . . .” (Id. at p. 711, fn. 3.) 

A. Razuki’s Interest in Dispensary and Production Facility Entities

Malan and Hakim argue the receivership order must be vacated 

because Razuki failed to show a sufficient interest in the entities over which 

the receiver was appointed to satisfy section 564, subdivision (b)(1). Further, 

they contend that the catchall provision of section 564, subdivision (b)(9) is 

unavailable because Razuki chose to proceed under subdivision (b)(1). 

Razuki responds that the Settlement Agreement, enforceable or not, is 

evidence of an oral partnership agreement with Hakim and his significant 

interest in the Dispensary and the Production Facility. Further, his 

declarations and the attached documentation showed his significant financial 

17 Hakim cites one case addressed to the probability of prevailing, 

Teachers Ins. & Annuity Assn. v. Furlotti (1999) 70 Cal.App.4th 1487, 1493 

(Teachers). Teachers, however, was an appeal of a preliminary injunction 

requiring the defendant to remove a fence in a shared easement. (Id. at 

pp. 1490-1492.) 
39

contributions to these businesses. We agree with Razuki that these facts 

supported the trial court’s determination that he had standing to pursue a 

receiver under section 564, subdivision (b)(1) over the Dispensary and 

Production Facility, and the various entities that served the two 

businesses.18 

The evidence presented to the trial court satisfied the requirement that 

Razuki show a probable interest in the assets. Razuki’s declaration attached 

the executed Settlement Agreement memorializing his interest in the 

operations of both the Dispensary and the Production Facility, specifically his 

right to receive profits from those entities through the mechanism of RM 

Property. In addition, Razuki’s declaration outlined the background of the 

Settlement Agreement and the underlying partnership with Malan, which 

showed their agreement to share the profits from their joint ventures. 

Indeed, Malan’s own declaration recounted his longstanding arrangement 

with Razuki whereby profits in their real estate investments were split 75/25 

in favor of Razuki. 

Razuki also submitted documentation showing the collateral he 

pledged to secure the purchase and refinancing of the Production Facility

property; his cash investments of over $450,000 in this property and the 

facility’s licensure; and documentation showing the transfer of the 

Dispensary property from an entity wholly owned by him to SD United. 

Although Malan and Hakim submitted documentation showing their own 

18 Malan makes passing reference in his brief to the inclusion of Devilish 

in the receivership as improper because the title owner (Roselle) was 

excluded and Devilish was formed to hold Roselle’s licenses. However,

despite the exclusion of Roselle, Devilish was explicitly named as a party to 

the management agreement with SoCal for the Production Facility, bringing 

Devilish within the purview of the receivership. 
40

investments in the properties and businesses, the documents did not refute 

Razuki’s evidence of his own interest.

These facts distinguish the case from Rondos v. Superior Court of 

Solano County (1957) 151 Cal.App.2d 190, relied upon by appellants. In 

Rondos, one of two owners of a business licensed by the Department of 

Alcoholic Beverage Control (ABC), Marvin Caesar, contracted to sell his stake 

to Edward Essy with the consent of the other owner, George Rondos. When 

the required application to transfer the business was not approved by ABC 

within a year, Rondos served Essy with notice of rescission of the contract for 

sale and notified ABC that he was withdrawing the application for transfer. 

Essy brought suit and obtained the appointment of a receiver over the 

business. (Id. at p. 193.) The Court of Appeal reversed the receivership

order, holding that Essy had failed to establish a probable interest under 

section 564, subdivision (1) (the identical predecessor to (b)(1)). (Rondos, at 

pp. 194-195.) Critically, the parties’ contract explicitly stated the transfer of 

Caesar’s interest to Essy would not occur until ABC approved the transfer. 

(Id. at p. 194.) No similar uncontroverted evidence exists in this case that 

would have precluded the trial court’s finding that Razuki had shown a 

probable interest in the assets at issue. 

Malan and Hakim point to no evidence showing Razuki’s contributions 

to the businesses did not occur, or that Razuki made them without 

expectation of sharing in the profits. The trial court was tasked with making 

a preliminary determination as to whether Razuki was a partner or investor 

in these assets with a probable interest in them. There was sufficient

evidence before the court supporting its determination that Razuki had 

satisfied this standard. (See Maggiora, supra, 249 Cal.App.2d at p. 711 [“At 

this stage of the proceedings, nothing more than a probable joint or common 
41

interest in the property concerned need be shown . . . .”]; see also Eng v. 

Brown (2018) 21 Cal.App.5th 675, 694 [“In general, ‘the association of two or 

more persons to carry on as coowners a business for profit forms a 

partnership, whether or not the persons intend to form a partnership.’ (Corp. 

Code, § 16202, subd. (a).) With certain exceptions, ‘[a] person who receives a 

share of the profits of a business is presumed to be a partner in the 

business . . . .’ . . . ”].) It is not this court’s role to second guess that 

determination. 

Appellants’ claim that Razuki lacks a sufficient interest to obtain a 

receiver bears a resemblance to the issue decided in Sachs, an appeal from 

the confirmation of a receiver after an ex parte appointment. (Sachs, supra, 

165 Cal.App.2d at p. 207.) There, the defendants “urge[d] that the written 

agreement” giving plaintiff, the inventor of a device “to regulate the speed of 

electric motors,” a percentage of net profits in the manufacturing and sale of 

the device “created neither a partnership nor a joint venture.” (Id. at p. 213.) 

The defendants asserted that the plaintiff was “in the position of an 

unsecured creditor suing at law to recover a debt.” (Ibid.) The trial court 

rejected this argument, concluding even if it was an accurate analogy, it did 

not preclude the receivership because “[t]he action is not one of law, but is 

essentially an equitable action to obtain an accounting and establish a 

constructive trust.” (Ibid.) 

In affirming, the Sachs court recognized the defendants had submitted 

conflicting evidence, denying that the plaintiff invented the device and 

contending he stole it from his employer, and asserting the profit sharing 

agreement was unenforceable because the plaintiff had failed to uphold his 

obligation to do certain “experimental and design work.” (Sachs, supra, 165 

Cal.App.2d at p. 210.) However, the court concluded the plaintiff’s assertion 
42

that he entered into the agreement with the defendants was sufficient under 

the receivership statute to support the trial court’s finding that the plaintiff 

had shown a probable interest in the business. (Id. at p. 213.) 

As in Sachs, defendants here submitted evidence contradicting 

Razuki’s claim to the property and profits of the Dispensary and Production 

Facility. This conflicting evidence, however, does not establish the court 

abused its discretion by crediting Razuki over defendants and finding Razuki 

had shown a probable right to possession at this stage of the litigation. 

For these same reasons, we reject Malan’s assertion that Razuki’s 

failure to transfer his pledged interests in Super 5 and Sunrise to RM 

Property, as contemplated by the Settlement Agreement, precludes 

appointment of the receiver.19 This fact does not conclusively establish that 

Razuki lacked a probable interest in the assets placed in receivership. 

Rather, it was one fact among many conflicting facts about Razuki’s 

ownership.20 

B. Enforceability of Settlement Agreement As Against Public Policy

Malan argues the Settlement Agreement is void because it was against 

public policy when it was entered and therefore Razuki “has not shown the 

requisite likelihood of success on the merits.” Malan also argues the explicit 

19 We also reject Malan’s contention that Razuki’s failure to join Super 5 

and Sunrise as indispensable parties precludes his claims. Malan fails to 

provide any legal argument in support of this position. (Mansell, supra, 30 

Cal.App.4th at pp. 545-546.) 

20 We do agree with Hakim and Malan that proceeding under one of the 

more specific provisions of section 564 precludes reliance on the catchall 

provision of subdivision (b)(9). (See Marsch, supra, 23 Cal.App.4th at p. 246, 

fn. 8.) However, because we affirm the trial court’s finding under subdivision 

(b)(1), we need not address the issue. 
43

protection for contracts involving cannabis businesses afforded by Civil Code 

section 1550.5 are not applicable because the law became effective after the 

Settlement Agreement was executed.

As discussed, the law applicable to the appointment of a receiver does 

not require the plaintiff to show a likelihood of prevailing on the merits of his 

claims. Rather, Razuki was required to show a probable right to the assets 

placed in receivership and that “the same was in danger of being lost, 

removed or materially injured . . . .” (Alhambra, supra, 116 Cal.App.2d at 

p. 873.) Further, the trial court “is not required to determine the ultimate 

issues involving the precise relationship of the parties.” (Maggiora, supra, 

249 Cal.App.2d at p. 711.) 

Malan’s assertion that the Settlement Agreement is unenforceable 

because it was against the public policy of this state at the time it was 

entered, does not convince us the trial court abused its discretion by 

appointing the receiver. “Anything that has a tendency to injure the public 

welfare is, in principle, against public policy. But to determine what 

contracts fall into this vague class is exceedingly difficult. It has been 

frequently observed that the question is primarily for the Legislature, and 

that, in the absence of a legislative declaration, a court will be very reluctant 

to hold the contract void.” ([§ 453] General Principle., 1 Witkin, Summary 

11th Contracts § 453 (2020); see also Moran v. Harris (1982) 131 Cal.App.3d 

913, 919-920, quoting Stephens v. Southern Pacific Co. (1895) 109 Cal. 86, 89-

90 [“ ‘ “The power of the courts to declare a contract void for being in 

contravention of sound public policy is a very delicate and undefined power, 

and, like the power to declare a statute unconstitutional, should be exercised 

only in cases free from doubt.” [Citation.] . . . “No court ought to refuse its aid 

to enforce a contract on doubtful and uncertain grounds. The burden is on 
44

the defendant to show that its enforcement would be in violation of the 

settled public policy of this state, or injurious to the morals of its people.” 

[Citation.]’ ”].) 

As an initial matter, Razuki’s claims are not entirely reliant on the 

enforceability of the Settlement Agreement. Razuki sought the receiver 

appointment to protect his rights to the real properties and to the past and 

potential profits derived from the Dispensary and the Production Facility. 

He seeks to enforce those rights not only by way of the Settlement 

Agreement, but also by enforcement of his oral partnership agreement with 

Malan. 

Additionally, the Settlement Agreement on its face does not concern the 

operations of a recreational marijuana business, which could arguably have 

been classified as illegal at the time the agreement was executed. The 

agreement’s first recital states: “RAZUKI and MALAN have engaged in 

several business transactions, dealings, agreements (oral and written), 

promises, loans, payments, related to the acquisition of real property and 

interests in various medical marijuana businesses. Specifically, RAZUKI

and MALAN have each invested certain sums of capital for the acquisition of 

the following assets . . . .” (Italics added.) At the time the contract was 

entered, business related to the provision of medical marijuana was lawful 

and not against this state’s public policy. 

In addition, the fact that marijuana use remains a violation of federal 

law does not necessarily establish the contract is unenforceable. Even if a 

dispute involves an “illegal contract” it can “be enforced in order to ‘avoid 

unjust enrichment to a defendant and a disproportionately harsh penalty 

upon the plaintiff.’ ” (Asdourian v. Araj (1985) 38 Cal.3d 276, 292.) “ ‘ “[T]he 

extent of enforceability and the kind of remedy granted depend upon a 
45

variety of factors, including the policy of the transgressed law, the kind of 

illegality and the particular facts.” ’ ” (Ibid.) 

The trial court was tasked with making an early determination 

concerning the necessity of a receiver to protect the real property and other 

assets at issue. The court was not charged with determining the ultimate 

issue of enforceability of the Settlement Agreement and its failure to reach 

this issue to preclude Razuki’s claims at this stage was not an abuse of 

discretion.21 

C. Necessity of Derivative Action

Malan also argues that Razuki lacks standing to enforce the Settlement 

Agreement and that his claims should have been brought as a derivative 

action on behalf of RM Property. This argument misconstrues the claims 

asserted by Razuki. Razuki seeks to enforce the Settlement Agreement and 

his oral partnership agreement. Razuki’s claims are not that Malan and 

Hakim defrauded RM Property. Rather he alleges that Malan breached the 

Settlement Agreement and that Malan and Hakim otherwise engaged in 

illegal and fraudulent conduct to prevent Razuki from obtaining the benefits 

of his partnership with Malan. Contrary to Malan’s assertion, these claims 

are not necessarily derivative and were properly brought by Razuki on his 

own behalf. (See Schuster v. Gardner (2005) 127 Cal.App.4th 305, 312 

21 Malan also relies on Civil Code section 1550.5 (recognizing the 

lawfulness of certain medicinal and/or adult-use cannabis commercial 

activity) and the fact that the law did not take effect until January 1, 2018, 

almost two months after the Settlement Agreement was executed. Although 

the statute’s existence may be a factor in determining the enforceability of 

the Settlement Agreement and/or the alleged oral agreement, it did not 

preclude the receiver appointment at this early stage of the litigation. 
46

[A “ ‘derivative action [is] filed on behalf of the corporation for injury to the 

corporation for which it has failed or refused to sue.’ ”].) 

V. Imminent Injury and Availability of Less Dramatic Relief

Malan and Hakim contend the court erred by determining the balance 

of harms favored Razuki and SoCal’s request for a receiver. They primarily 

argue that events occurring after the appointment—the Production Facility’s 

failure to obtain new clients—demonstrate why the trial court was incorrect 

in finding there was a risk to Razuki’s interest during the pendency of this 

litigation. Malan also asserts there was no evidence of any risk of destruction 

to the businesses’ operations or the property. Further, Malan and Hakim 

both contend that lesser remedies were available to protect Razuki’s 

interests. 

Razuki responds that the risk of harm to his interest was significant 

because ownership of the cannabis operations, in particular the property that 

was permitted for such operations, “is a unique asset that cannot easily be 

replicated or otherwise replaced with money damages. Specifically, an 

ownership or equitable interest in those businesses and related facilities also 

grants an interest in the licenses and [CUPs] which allow those marijuana 

businesses to operate legally in San Diego. As the number of such licenses is 

rigorously restricted, the ownership of those business is a unique and 

irreplaceable asset.” Further, Razuki points to the cash nature of the 

businesses, which makes accounting for and after-the-fact tracing of profits 

particularly difficult. Because of these facts, Razuki contends the trial court

did not abuse its discretion by finding that a receivership was necessary to 

protect his stake in the enterprise while his claims proceed through the court. 

We agree. 
47

To appoint a receiver under section 564, subdivision (b)(1), the trial 

court must determine whether the “property or fund is in danger of being 

lost, removed, or materially injured.” “[T]he availability of other remedies 

does not, in and of itself, preclude the use of a receivership. (Sibert v. Shaver

[(1952)] 113 Cal.App.2d 19, 21.) Rather, a trial court must consider the 

availability and efficacy of other remedies in determining whether to employ 

the extraordinary remedy of a receivership.” (City and County of San 

Francisco v. Daley (1993) 16 Cal.App.4th 734, 745.) 

Contrary to Malan and Hakim’s assertions on appeal, at the time the 

trial court confirmed the receivership, there was substantial evidence 

presented by Razuki suggesting that his investment in the dispensary and 

production facility was in jeopardy as a result of defendants’ actions. The 

court had before it competing claims of ownership by Razuki and SoCal, and 

at least one separate pending lawsuit to quiet title over the Dispensary 

property. In addition, the initial receiver appointment in July had resulted 

in allegations that Malan and his counsel had directed Dispensary employees 

to take significant amounts of cash from the businesses. 

Other facts before the court also suggested the property itself was in 

jeopardy of destruction. For instance, SoCal submitted the affidavit of a 

witness who saw the illegal transportation of cannabis products to the 

Production Facility, potentially jeopardizing the facility’s permit. Malan and 

Hakim argued that SoCal’s employees were also jeopardizing the viability of 

the dispensary through their mismanagement. There were also competing 

claims on the valuable equipment in the production facility, and threats it 

would be sold or destroyed. 

When the unique character of this real property is considered in 

conjunction with the erratic behavior of the various parties leading to the 
48

September 7 hearing, the trial court’s determination that there was a 

significant risk of irreparable harm to these assets requiring a neutral third 

party to step in was not an abuse of its wide discretion. In addition, the allcash nature of the Dispensary and Production Facility, combined with a 

specific claim that cash had already been misappropriated from the 

Dispensary without proper accounting, supported the trial court’s conclusion 

there was a risk of irreparable harm to the assets during this litigation. (See 

Moore v. Oberg (1943) 61 Cal.App.2d 216, 221-222 (Moore) [“So broad is the 

discretion of the trial judge that his order based upon facts concerning which 

reasonable minds might differ with respect to the necessity for the 

receivership will not be reversed. We cannot substitute our conclusion for 

that of the trial court made upon sufficient evidence even if we should be of 

the opinion that there was no danger of the loss or removal of, or other 

irreparable injury to, the assets of the joint venture. To justify our 

interference with the order confirming the appointment herein, it must be 

made clearly to appear that the order was an arbitrary exercise of power.”].) 

With respect to Malan and Hakim’s argument that the receivership has 

harmed the assets since September 26, 2018, it is not this court’s role to 

review the activity that took place after the appealed order. (Bach v. County 

of Butte (1989) 215 Cal.App.3d 294, 306 (Bach).) This information was not 

before the trial court when it confirmed Essary’s appointment and thus is not 
49

a proper basis for reversal of the order.22 Hakim also argues that the 

appointment was unnecessary because after July 10, the Production Facility

had generated no profits, and thus there was nothing for the receiver to 

manage. This argument does not assist Hakim. Rather it highlights the 

contradictions that were facing the trial court, including Hakim’s and 

Malan’s assertions that Synergy had secured profitable contracts before 

Essary’s appointment. The argument also casts doubt on appellants’ 

assertions that the receiver is the reason for the facility’s lack of profit. 

In sum, the receivership was an appropriate remedy for the court to 

track the cash the parties stated was flowing, and that had flowed, through 

the two operations; control the parties’ chaotic ownership disputes; and

protect the real property jeopardized by the parties’ conduct. While the other 

remedies appellants suggest might also have protected Razuki’s interest, 

Malan and Hakim have not shown the court’s decision to confirm the receiver 

was “an arbitrary exercise of power.” (Moore, supra, 61 Cal.App.2d at p. 222.) 

VI. Unclean Hands

A. Background

Finally, Malan and Hakim ask this court to overturn the September 26

order based on the federal criminal charges that Razuki now faces. In 

support of their argument, Malan and Hakim included in the Appellants’ 

Appendix briefing and declarations for Hakim’s May 8, 2019 “Ex Parte 

22 For the same reason, Hakim’s motion to augment the record to include 

subsequent reports of the receiver and related documentation is denied. (See 

In re Marriage of Folb (1975) 53 Cal.App.3d 862, 877, disapproved on other 

grounds by In re Marriage of Fonstein (1976) 17 Cal.3d 738, [“But we must 

reiterate that matters occurring after judgment are generally not reviewable 

on appeal . . . . The trial court remains the more appropriate forum in which 

to litigate these subsequent developments.”].) 
50

Application to Remove Receiver from [Production] Facility . . . .” These 

documents include Malan’s declaration attaching the criminal complaint filed 

against Razuki in the Southern District of California, United States of 

America v. Razuki, case No. 3:18-mj-05915-MDD (S.D.Cal. 2018) and the 

related grand jury indictment. The probable cause statement accompanying 

the complaint describes an FBI sting operation in which two women who

Malan describes as Razuki’s employees, hired the FBI’s confidential 

informant to kidnap and murder Malan. 

The statement explains that one of the women, Sylvia Gonzalez, first 

met with the FBI informant on October 17, 2018, and at a subsequent 

meeting on November 5, 2018, told the informant that she wanted to get rid 

of Malan because it looked like “they [we]re going to appeal” and Razuki “has 

a lot of money tied up right now, and he’s paying attorney fees.” The 

statement describes several additional meetings between the women and the 

informant where they discussed a plan to kidnap Malan and take him to 

Mexico where they would murder him. Razuki was alleged to be present at 

one meeting, but not directly involved in conversations concerning the 

murder plot. 

According to the statement, Gonzalez contacted the informant on 

November 13, 2018, to tell him that Malan would be at the San Diego 

Superior Court that day and on November 15, 2018, the informant met with 

Razuki and told him that he “took care of it.” During the November 15, 2018 

meeting, the informant requested payment from Razuki, who told the 

informant to ask Gonzalez. Gonzalez, the other woman, and Razuki were all 

arrested over the course of the next day. The criminal complaint contains 

two charges against Razuki, conspiracy to kidnap and conspiracy to murder 

in a jurisdiction outside the United States. 
51

Hakim also asserts that in June 2017 Razuki threatened “to burn down 

the Mira Este facility,” when Hakim refused to lend Razuki the $518,000 in 

proceeds Hakim received from the cash-out refinance on that property. 

B. Analysis

“The defense of unclean hands arises from the maxim, ‘ “ ‘He who 

comes into Equity must come with clean hands.’ ” ’ [Citation.] The doctrine 

demands that a plaintiff act fairly in the matter for which he seeks a remedy. 

He must come into court with clean hands, and keep them clean, or he will be 

denied relief, regardless of the merits of his claim. [Citations.] The defense 

is available in legal as well as equitable actions. [Citations.] Whether the 

doctrine of unclean hands applies is a question of fact.” (Kendall-Jackson 

Winery, Ltd. v. Superior Court (1999) 76 Cal.App.4th 970, 978 (KendallJackson).) 

“Any conduct that violates conscience, or good faith, or other equitable 

standards of conduct is sufficient cause to invoke the doctrine. [Citations.] 

[¶] The misconduct that brings the unclean hands doctrine into play must 

relate directly to the cause at issue. Past improper conduct or prior 

misconduct that only indirectly affects the problem before the court does not 

suffice. . . . The misconduct ‘must relate directly to the transaction 

concerning which the complaint is made, i.e., it must pertain to the very 

subject matter involved and affect the equitable relations between the 

litigants.’ ” (Kendall-Jackson, supra, 76 Cal.App.4th at p. 979.) 

Without any question, the conduct alleged in the federal complaint as 

well as the allegation that Razuki threatened to burn down the Mira Este 

facility is powerful evidence that could form the basis for the unclean hands 

doctrine defense. Critically, however, none of this information was before the 

trial court at the time it entered the receivership order challenged in this 
52

appeal. Malan and Hakim do not dispute that the kidnap and murder 

conspiracy allegations first came to light in November 2018, almost two 

months after the issuance of the appealed order. Additionally, Hakim’s only 

citation in the record to the threat he alleges Razuki made in 2017 to burn 

down the Production Facility is contained in his declaration in support of his 

May 8, 2019 ex parte application to remove the receiver, more than six 

months after the issuance of the appealed order.

This court’s role is to evaluate the ruling that was appealed by Malan 

and Hakim, not events that came later and that were not considered by the 

trial court. Malan and Hakim present no basis for this court to consider this 

new information.23 (See Bach, supra, 215 Cal.App.3d at p. 306 [“It is 

elementary that an appellate court is confined in its review to the 

proceedings which took place in the trial court. [Citation.] Accordingly, when 

a matter was not tendered in the trial court, ‘It is improper to set [it] forth in 

briefs or oral argument, and [it] is outside the scope of review.’ ”].) While the 

alleged criminal conduct is concerning, to say the least, it is not a proper 

basis for reversal by this court of the challenged receivership order. 

23 In his reply brief, Malan argues the timing of the conduct does not 

matter and quotes Kendall-Jackson, which states the general maxim that a 

plaintiff in equity “must come into court with clean hands, and keep them 

clean, or he will be denied relief, regardless of the merits of his claim.” 

(Kendall-Jackson, supra, 76 Cal.App.4th at p. 978, italics added.) KendallJackson, however, does not address the situation here, where conduct that 

was not before the trial court is used as the basis for a request that this court 

reverse the trial court’s order. 
53

DISPOSITION

The order is affirmed. Appellants to bear respondent’s costs on appeal. 

HALLER, J.

WE CONCUR:

HUFFMAN, Acting P. J.

GUERRERO, J.