Court Opinion

ID: 4662555
Source: CourtListenerOpinion
Date Created: 2021-02-24 19:02:27.286358+00
Date Added: 2024-06-11T08:02:22.386772
License: Public Domain

Filed 2/24/21 Razuki v. Malan CA4/1
                   NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or
ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for
purposes of rule 8.1115.

                 COURT OF APPEAL, FOURTH APPELLATE DISTRICT

                                                       DIVISION ONE

                                              STATE OF CALIFORNIA

 SALAM RAZUKI,                                                                D075028

            Plaintiff and Respondent,

            v.                                                                (Super. Ct. No. 37-2018-
                                                                              000034229-CU-BC-CTL)
 NINUS MALAN et al.,

            Defendants and Appellants.

          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.
      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

                                        5
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).)

                                        6
       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

                                        7
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

                                       8
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,

                                       9
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.

                                       10
      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.

                                       11
      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

                                      12
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.

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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

                                      15
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.”

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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

                                      17
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.

                                         18
                 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

                                      19
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.

                                       20
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

                                       21
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.

                                       22
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.

                                      23
      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

                                      24
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.

                                       25
                     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.

                                       26
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.
                                        27
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

                                       28
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.

                                       29
                            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 short-
circuited. 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.

                                        30
      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

                                       31
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

                                       32
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.

                                      33
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.

                                        34
      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.

                                       35
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

                                       36
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.

                                       37
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.)

                                            38
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.

                                      39
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

                                         40
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

                                           41
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.

                                       42
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

                                        43
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

                                        44
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.

                                         45
[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.

                                         46
      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

                                       47
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 all-
cash 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

                                       48
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.”].)

                                         49
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.

                                       50
      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 (Kendall-
Jackson).)
      “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

                                       51
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.) Kendall-
Jackson, 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.

                                        52
                              DISPOSITION
     The order is affirmed. Appellants to bear respondent’s costs on appeal.

                                                                HALLER, J.

WE CONCUR:

HUFFMAN, Acting P. J.

GUERRERO, J.

                                    53