Judge James C. Chalfant, Case 20STCV33044 2022-08-09 Tentative Ruling

Myra Weiss, et al. v. Maple and Vail, LLC, et al., 20STCV33044

Tentative decision on application for appointment of receiver: granted

Defendant/Cross-Complainant Bernard Michlin (“Bernard”), individually and as trustee of the Bernard A. Michlin Trust, seeks the appointment of a receiver for four pieces of commercial property (collectively, “Maple Vail Properties”).

The court has read and considered the moving papers,[1] opposition, and reply, and renders the following tentative decision.

Plaintiff Myra Weiss (“Myra”), individually and as Trustee of the David E. Weiss Family Revocable Living Trust, filed her Complaint on August 31, 2020. The operative pleading is the First Amended Complaint (“FAC”), filed on March 1, 2021, alleging causes of action for (1) partition of real property, (2) financial elder abuse, (3) elder abuse via pain and mental suffering, and (4) unjust enrichment. The FAC alleges in pertinent part as follows.

The action concerns the four Maple Vail Properties: (1) 1133 South Maple Avenue, Montebello, California, 90640 (“1133 South Maple Avenue”); (2) 1129 South Maple Avenue, Montebello, California 90640 (“1129 South Maple”); (3) 856 South Vail Avenue, Montebello, California 90640 (“856 South Vail”); and (4) 900 South Vail Avenue, Montebello, California 90640 (“900 South Vail”).

Bernard, Willard Michlin (“Willard”), Myra, and Sybil Flom (“Sybil”) are the four children of Decedent Abe Michlin (“Abe”), who bequeathed to each a quarter interest in the properties as tenants-in-common. David E. Weiss (“David”), Myra’s husband, was named trustee of a trust to manage the real property interests of all four heirs. Willard sold his interest to the other three, making Bernard, Myra, and Sybil tenants-in-common with one-third interest each in the Maple Vail Properties.

Noah Flom (“Noah”), Sybil’s son, was not a beneficiary but founded a company, Maple & Vail, LLC (“Maple & Vail”), for his benefit and for that of his trust, SF-Apex Trust. In the year prior to establishing Maple & Vail, Noah accused Myra’s husband David of self-dealing, fraud, and serious mismanagement of the Maple Vail Properties to the detriment of their cotenants. Sybil’s audits of the bank statements found nothing to justify those claims.

Noah’s accusations and harassment caused Myra great mental stress and ruined her relationship with her sister Sybil. Nevertheless, she refuses to let Noah manage the Maple Vail Properties on her behalf or to transfer her interest to Maple & Vail. Noah falsely claims to have the right to manage the properties. While he represented that he would not divert funds from the Maple Vail Properties, he used funds from the rents to pay for the attorney’s fees incurred in Maple & Vail’s creation and other expenses that solely benefit him and his related Defendants.

Noah has engaged in a course of conduct that has deprived Myra from the rents, profits, use, and control of the Maple Vail Properties. He has collected the rents from one property without accounting for it or raising the rent to the fair market value so long as Noah’s employees occupy the building. Even then, the tenant has failed to pay the rent owed. The net losses from this decision are at least $200,000. Separately, Noah rented another of the lots to a Hollywood studio and received $25,000 without informing the tenants-in-common. Noah has refused to provide a full accounting of rents and profits that were paid, or should have been paid, by SF-Apex Trust.

Myra seeks (1) partition by sale of the Maple Vail Properties, (2) an order that the costs of partition be paid by the tenants-in-common in proportion to their respective interests, (3) an expert appraisal of the Maple Vail Properties, (4) an accounting by Noah and SF-Apex Trust for the rents collected and profits generated by the Maple Vail Properties, (5) payment to Myra of one-third of said rent and profits, (6) establishment of a constructive trust over Noah’s assets and property, (7) appointment of a receiver for the Maple Vail Properties, (8) an order charging Sybil’s share of the sale of the Maple Vail Properties in an amount equal to two-thirds of the fair rental value of the Maple Vail Properties during the period those properties have been under Noah’s control, (9) damages, (10) attorney’ fees and costs, and (11) punitive and exemplary damages.

On December 18, 2020, Bernard filed a Cross-Complaint against Cross-Defendants Maple & Vail, Noah, individually and as trustee of the SF-Apex Trust, Sybil, individually and as trustee of the Sybil Flom Trust, and Myra. The operative pleading is the First Amended Cross-Complaint (“FACC”) filed January 28, 2022, alleging causes of action for (1) declaratory relief; (2) quiet title, (3) partition, (4) non-statutory ouster, (5) quasi-contract, (6) financial elder abuse, (7) breach of fiduciary duty, (8) recission, and (9) conversion. The FACC alleges in pertinent part as follows.

David oversaw the Maple Vail Properties through operation of the Morning Family Trust No. 2. When David conveyed one-third ownership of the Maple Vail Properties to Bernard, Myra, and Sybil following Willard’s decision to sell his interest, the remaining three agreed that David would remain authorized to manage the Maple Vail Properties and invest their profits.

Either SF-Apex Trust is the only member of Maple & Vail or the only other member is Noah or Sybil.

On October 15, 2019, Bernard transferred his interest in the Maple Vail Properties to his trust.

In March 2019, Bernard, Sybil, and Noah executed a variety of Agreements pertaining to the transfer of Bernard’s interest in the Maple Vail Properties to Noah and Maple & Vail (“March 2019 Agreements”). However, the parties’ rights under these agreements came into dispute and Noah and Maple & Vail filed suit against Bernard. The court ordered arbitration of some of the claims and on December 30, 2021, the arbitrator found that Noah, Sybil, and Maple & Vail (the “Sybil Parties”) sought to evade payment of taxes and violated state and federal securities laws. The arbitrator’s award therefore invalidated the March 2019 Agreements and recognized Bernard as the owner of one-third interest in the Maple Vail Properties.

Both before and after the March 2019 Agreements, Noah claimed to be entitled to manage the Maple Vail Properties. Neither Myra nor Bernard consented to this. Noah has used that authority to divert some rent from those properties to pay personal expenses such as the attorney’s fees incurred in the creation of Maple & Vail. Noah has commingled this revenue with personal assets and those of his trusts. The Sybil Parties refuse to distribute Michelin’s interest in the net profits in the Maple Vail Properties from 2020 and 2021.

Noah has also engaged in a course of conduct that has deprived Bernard of the rents, profits, use, and control of the Maple Vail Properties. He has collected the rents form one property without accounting for it or raising the rent to the fair market value so long as Noah’s employees occupy the building. Even then, that tenant has failed to pay the rent it owes. The net losses from this decision alone are at least $200,000. Separately, he rented out another of the lots to a Hollywood studio and received $25,000 without informing the owners. Noah has also refused upon request to provide a full accounting of rents and profits, including rents collected and that should have been paid by SF-Apex Trust.

On June 10, 2020, Maple & Vail entered into a lease with Apex Drum Company, Inc. (“Apex Drum”) for portions of the Maple Vail Properties. Noah negotiated this deal despite the fact that he is both Maple & Vail’s trustee and the trustee of SF-Apex, the sole shareholder of Apex Drum. Noah did not advise Bernard or Myra that he was negotiating a long-term lease and he only provided a copy of the lease after the court ordered it. The terms were not comparable to a lease those that a disinterested landlord and tenant would negotiate at arm’s length.

The Sybil Parties refuse to provide a full accounting of profits, rents collected, and expenses paid, with respect to The Maple Vail Properties while under their purported management.

Bernard seeks (1) confirmation of the arbitration award and injunctive relief enforcing it, (2) quiet title to his undivided one-third fee simple interest in the Maple Vail Properties, (3) an accounting for the Maple Vaile Properties, (4) an appointment of a receiver to take possession of the Maple Vail Properties, (5) damages, (5) establishment of a constructive trust over the rents and profits from the Maple Vail Properties, (6) recission of the Apex Drum lease, (7) attorney’s fees and costs, and (8) interests at the legal rate.

The Sybil Parties demurred to the Complaint. On January 19, 2021, Dept. 73 (Hon. Rafael Ongkeko) overruled the demurrer for two causes of action, sustained with leave to amend for two causes of action, and sustained without leave to amend for another cause of action.

On January 14, 2021, Bernard filed his Cross-Complaint and an Answer to the Complaint.

On February 24, 2021, Bernard filed a motion for a stay or consolidate arbitration and the litigation. On February 26, 2021, Maple & Vail filed a motion to compel arbitration and stay the case.

On April 30, 2021, the Sybil Parties demurred to the FAC’s third cause of action for elder abuse. On June 11, 2021, Dept. 73 (Hon. Timothy Dillon) sustained the demurrer to this cause of action without leave to amend.

On October 26, 2021, Myra moved to bifurcate the trial so that the FAC’s partition cause of action was tried first. Dept. 73 (Hon. Timothy Dillon) granted the motion on December 7, 2021.

On January 11, 2022, the Sybil Parties filed a notice of a related case, Sybil Flom v. Bernard et al. (21STCV43024). Dept. 73 (Hon. Timothy Dillon) related the two cases on January 12, 2022.

On January 24, 2022, Myra amended the FAC to add Apex Drum as a named Defendant. Myra subsequently amended the FAC to add Leonard Fowle (“Fowle”), Ignacio Flores (“Flores”), Complete Demolition Inc. (“Complete Demolition”), Cecilia Enriquez (“Enriquez”), Leonardo Leon (“Leon”), and Jaime Martell Ramirez (“Ramirez”) as named Defendants.

On January 28, 2022, Bernard filed the FACC. On March 30, 2022, Bernard amended the FACC to add Enriquez, Fowle, and Ramirez as named Cross-Defendants.

On March 1, 2022, Bernard moved to confirm the final arbitration award and enter separate judgment. The Sybil Parties moved to vacate the award. On May 20, 2022, Dept. 73 (Hon. Timothy Dillon) confirmed the arbitration award.

On April 15, 2022, the parties stipulated that (1) Sybil and Bernard would arbitrate the cause of action for unjust enrichment in Sybil Flom v. Bernard et al., (2) any allegations by Bernard or Sybil of elder abuse should be dismissed with prejudice, and (3) Sybil’s cross-action will be stayed while the balance of the action and all of Myra’s claims are tried. Dept. 73 (Hon. Timothy Dillon) approved the resulting order on April 18, 2022.

On May 5, 2022, Bernard amended the FACC to add Flores, Complete Demolition, and Leon as Cross-Defendants.

On May 27, 2022, Bernard filed a motion to appoint a receiver over the Maple Vail Properties in Dept. 73 (Hon. Timothy Dillon). On June 13, 2022, Bernard took the motion of calendar for refiling with this department.

CCP section 564(b) provides that the court has authority to appoint a receiver in any of the following pertinent circumstances: (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 thereof, is probable, and where it is shown that the property or fund is in danger of being lost, removed, or materially injured; and (9) in all other cases where necessary to preserve the property or rights of any party.

The appointment of a receiver is a drastic remedy to be utilized only in “exceptional cases.” As such, a receiver should not be appointed unless absolutely essential and because no other remedy will serve its purpose. City & County of San Francisco v. Daley, (1993) 16 Cal.App.4th 734, 744. A plaintiff who seeks appointment of a receiver of certain property under CCP section 564(b)(1) has the burden to establish by a preponderance of the evidence that plaintiff has a joint interest with defendant in the property, that the property is in danger of being lost, removed or materially injured, and that plaintiff's right to possession is probable. Alhambra-Shumway Mines, Inc. v. Alhambra Gold Mine Corp., (1953) 116 Cal.App.2d 869, 873.

When Abe died on November 19, 2016, he had four children: Bernard, Willard, Myra, and Sybil. Bernard Decl., ¶¶ 3-4. Bernard is trustee of the Bernard A. Bernard Trust (“Bernard Trust”), Sybil is trustee of the Sybil Flom Trust (“Sybil Trust”), and Myra is a trustee of the David E. Myra Family Revocable Trust (“Myra Trust”). Bernard Decl., ¶¶ 2, 5-6. David Weiss (“David”) is Myra’s husband. Bernard Decl., ¶9.

Noah, Sybil’s son, is the trustee and sole beneficiary of the SF-Apex Trust (“SF-Apex”). Bernard Decl., ¶7; Henry Decl., ¶6, Ex. 16. Maple & Vail is a limited liability company with Noah and Sybil as the only members, either as individuals or trustees of their trusts. Bernard Decl., ¶8.

In December 1984, Abe established the Morning Family Trust No. 2 (“Morning Family Trust”) for the benefit of his four children. Bernard Decl., ¶11. Abe transferred the Maple Vail Properties to the Morning Family Trust. Bernard Decl., ¶11; David Decl., ¶¶ 2-3, Ex. 4-5. Abe named David as trustee of the Morning Family Trust. Bernard Decl., ¶11.

In January 1985, David leased a major portion of the Maple Vail Properties to Apex Drum, a company that owned by Abe, for a monthly rent of $1,706. David Decl., ¶4, Ex. 6. The leases expired on December 31, 1999. David never signed a new lease with Apex Drum, which thereafter became a month-to-month tenant. David Decl., ¶4, Ex. 6.

In June 2009, Willard sold his interest to his three siblings, leaving each with a one-third interest. Bernard Decl., ¶12; David Decl., ¶5; Myra Decl., ¶2.

In November 2009, as Morning Family Trust’s trustee, David quitclaimed the Maple Vail Properties to the Sybil Trust, the Myra Trust, and Bernard. David Decl., ¶6, Ex. 7. The siblings agreed that David would remain authorized to manage and invest proceeds of the Maple Vail Properties. David Decl., ¶6; Myra Decl., ¶3. On August 21, 2019, Bernard transferred his interest to the Bernard Trust. Bernard Decl., ¶16, Ex. 1.

Noah has no legal interest in the Maple Vail Properties. Myra Decl., ¶4; Bernard Decl., ¶15. In 2018 Noah and Sybil began complaining about the use of the Maple Vail Properties and the rents being charged. Bernard Decl., ¶14; David Decl., ¶7, Ex. 8; Myra Decl., ¶4. By then Noah owned Apex Drum and was its President. Noah caused Apex Drum and three of its employees withhold rent from David, undercutting David’s ability to manage the properties. Bernard Decl., ¶14; David Decl., ¶7; Myra Decl., ¶4; Henry Decl., ¶7, Ex. 17.

In his October 29, 2021 declaration, Noah claimed that his concerns over David’s management caused him to withhold Apex Drum’s rent. RJN Ex. 42 (¶8). Once Apex Drum needed to show payment of rent for accounting purposes, Noah used SF-Apex to receive these payments to hold the funds in escrow until the dispute was resolved. RJN Ex. 42 (¶8). Noah claimed that, around this time, Sybil, Myra, and Bernard agreed to form Maple & Vail to take over David’s responsibilities, using Noah as manager. RJN Ex. 42 (¶8). Until Maple & Vail had its own bank account in May 2019, Noah used SF-Apex to receive Apex Drum’s rent payments. RJN Ex. 42 (¶10). This was the only money related to the Maple Vail Properties to ever enter SF-Apex accounts. RJN Ex. 42 (¶10). Once Maple & Vail had its own account, in 2019 Noah transferred the self-escrowed funds to Maple & Vail. RJN Ex. 42 (¶10). After that, SF-Apex did not have any Maple & Vail funds in its account. RJN Ex. 42 (¶10).

Noah’s statement that Bernard and Myra agreed that he could take over management of the Maple Vail Properties is false. In 2019, he began assuming management of the Maple Vail Properties without Bernard or Myra’s consent. Bernard Decl., ¶14; David Decl., ¶7; Myra Decl., ¶4. Myra and David never agreed to Noah’s takeover. David Decl., ¶7; Myra Decl., ¶4.

Bernard initially did not object to Noah’s management because at the time were discussing Bernard transferring his interest to Sybil; those plans fell through. Bernard Decl., ¶14. Myra declined an invitation to become a member of Maple & Vail when Noah set it up in December 2018. Myra Decl., ¶4.

When Bernard questioned Noah’s management, Noah said that Bernard had no interest in the Maple Vail Properties pursuant to the March 2019 Agreements transferring his interest to Noah and Maple & Vail LLC. Bernard Decl., ¶14. However, the arbitrator has ruled that the agreements are not enforceable. Bernard Decl., ¶17; Henry Decl., ¶31, Ex. 41.

On April 1, 2019, in response to claims that he had not properly fulfilled his role as property manager, David announced that he would raise Apex Drum’s rent based on the area of the lease. Henry Decl., ¶12, p. 57 (Ex. 21). Noah replied: “This is about to get ugly.” Henry Decl., ¶12, p. 57 (Ex. 21).

On April 2, 2019, David asked Myra’s daughter Nadine to pay back rent she owed at $1,000 a month for the previous four months. Henry Decl., ¶15, p. 66 (Ex. 24). Noah advised Sybil that as she was an owner, David could not evict Nadine. Henry Decl., ¶15, p. 66 (Ex. 24). In any case, he reasoned that “paying the old rent doesn't work in our benefit as it will get distributed.” Henry Decl., ¶15, p. 66 (Ex. 24). He advised that they should demand clear accounting from David for the past three years to stop his “bullying.” Henry Decl., ¶15, p. 66 (Ex. 24).

On October 24, 2019, Noah was asked if he would apply the $42,000 that Maple & Vail had collected from Apex Drum to the Morning Partnership. Henry Decl., ¶30, p. 68 (Ex. 25). Noah replied that he deliberately had not paid rent to Morning Partnership and instead gave money, initially from SF Trust and subsequently Maple & Vail. Henry Decl., ¶30, p. 70 (Ex. 26).

On June 10, 2020, Noah executed a ten-year lease with Apex Drum for monthly rent of $3,000. Henry Decl., ¶10, pp. 45-53 (Ex. 19); Bernard Decl., ¶19; Myra Decl., ¶5. This is the same rent Apex Drum paid for the same premises in 2006. Henry Decl., ¶25, p. 89 (Ex. 34). As early as 2003, as an Apex Drum employee, Noah had been trying to secure a lease that would go on in perpetuity, allow Apex Drum to continue with the same rights even when business conditions prevent it from paying rent, and prevent the property owners from using the property for other uses without Apex Drum’s approval. Henry Decl., ¶24, p. 87 (Ex. 33).

Noah did not inform David, Myra, or Bernard that he planned to negotiate a lease with Apex Drum; they only received a copy of the lease through discovery in this litigation. Bernard Decl., ¶20; David Decl., ¶9; Myra Decl., ¶6. Noah would later claim in discovery responses that when he had told his family he was taking over management in October 2018, Bernard said he did not want to know the particulars. Henry Decl., ¶8, pp. 40-42 (Ex. 18).

Maple & Vail sent Bernard checks for his share of the distributions from 2018 and 2019, although the original check for 2018 bounced and Maple & Vail reissued it. Bernard Decl., ¶27, Ex. 2. Noah has not made distributions to Bernard or Myra for 2020 or 2021. Bernard Decl., ¶27; Owens Decl., ¶5.

In 2020, Noah caused Maple & Vail to enter into three residential leases with Apex Drum employees. Henry Decl., ¶¶ 26-28, Exs. 35-37. Prior to Noah taking over management of the Maple Vail Properties, these employees had only oral, month-to-month leases. David Decl., ¶11. This was not the highest use of the property because the siblings had discussed tearing the houses down. David Decl., ¶11. Noah did not inform David, Myra, or Bernard that he was leasing to Apex Drum employees, at most saying he signed a lease with “the pallet guy” Ramirez, a non-employee. Bernard Decl., ¶21; David Decl., ¶10; Myra Decl., ¶¶ 7-8; Henry Decl., ¶30, Ex. 40.

Noah and Sybil have refused to raise the rent for Apex Drum or its employees to fair market value, claiming that (1) Apex Drum’s survival would be put at risk if it paid more rent, and (2) the employees cannot afford to pay more, even though Apex Drum pays their rent. Bernard Decl., ¶25.

Noah later revealed that he rented the Maple Vail Properties to CBS Television studios for filming on September 7, 2016. Bernard Decl., ¶26; Henry Decl., ¶20, Ex. 29. Although the agreement was for $15,000, he told Bernard that he received $25,000. Bernard Decl., ¶26; Henry Decl., ¶20, Ex. 29. When Bernard told Sybil that this money should go to the owners of the Maple Vail Properties, she replied that it was “her deal” and the other two were “out of luck.” Bernard Decl., ¶26.

Noah told Bernard that he and Sybil have not taken or diverted any funds from the Maple Vail Properties to fund Maple & Vail, finance its operations, or pay for Sybil’s and Noah’s personal use/purposes. Bernard Decl., ¶22. However, an accounting of Maple & Vail for 2019 shows $12,767.39 in fees paid to Beck & Christian. Henry Decl., ¶11, Ex. 20. When Bernard contacted the firm, he received confirmation that it did not represent him. Bernard Decl., ¶23. Various documents sent by Noah to Bernard show that Beck & Christian represented Sybil or Maple & Vail. Bernard Decl., ¶23.

Despite multiple requests since 2019, Noah has not provided either Myra or Bernard with an accounting of the tenants, rents charged or collected, and expenses. Bernard Decl., ¶24; Myra Decl., ¶9.

On June 22, 2021, Myra’s counsel emailed counsel for the Sybil Parties a request that the parties agree to retain an independent property manager for the Maple Vail Properties, given Myra’s contention that Noah had mismanaged them. Owens Decl., ¶2, Ex. 10. The Sybil Parties’ counsel rejected the proposal the same day, arguing that it was David who had mismanaged the properties. Owen Decl., ¶2, Ex. 10. Myra’s counsel asked, if that was true, why Noah refused to produce records of his collection of rents, expenditures, and permits? Owens Decl., ¶2, Ex. 10.

In responses to requests for admission on December 27, 2021, Noah asserted that he received rent payments for one of the Maple Vail Properties as manager of Maple & Vail. Henry Decl., ¶7, Ex. 17. He admitted that he did not provide Myra with any accounting for 2021, but only because accountings do not happen until the year’s end. Henry Decl., ¶7, Ex. 17. He denied that Apex Drum paid no rent to Myra during 2018, claiming that Apex Drum paid $36,000 to Maple & Vail, which eventually remitted Myra’ portion to her. Henry Decl., ¶7, Ex. 17.

On January 5, 2022, Bernard sent the Sybil Parties’ counsel a demand for his third of the net income from the Maple Vail Properties pursuant to the arbitration award acknowledging Bernard’s ownership. Henry Decl., ¶2, Ex. 13. Bernard reiterated the demand on January 19, 2022, while also revoking Noah’s authority to manage his interest without admitting Noah ever had that authority. Henry Decl., ¶3, Ex. 14. On January 25, 2022, the Sybil Parties’ counsel replied that Noah refused to distribute Bernard’s share – still questioning its validity – and asserted that Bernard could not unilaterally dismiss Noah as manager of the Maple Vail Properties. Henry Decl., ¶4, Ex. 15.

Myra’s counsel repeated the request for an agreement on an independent property management on January 31, 2022. Owens Decl., ¶3, Ex. 11. The Sybil Parties replied that they would agree only if the manager could not increase the rent of any current tenants without unanimous agreement of all three owners. This was not acceptable to Myra. Owens Decl., ¶4, Ex. 12.

If appointed as receiver, Gary Haddock (“Haddock”) believes that his company, Playa Vista Property Management, Inc. (“Playa Vista Property Management”), can competently manage the Maple Vail Properties. Haddock Decl., ¶¶ 1-3, Ex. 9. He and his company have no prior relationship with anyone who has an interest these properties. Haddock Decl., ¶5. Haddock will charge $325 per hour, and Playa Vista Property Management will charge 6% of gross scheduled rent and at least $1,500 per month. Haddock Decl., ¶6.

Abe owned Apex Drum, an oil-drum cleaning company. Sybil Decl., ¶3. Sybil’s husband Jerry work for Apex Drum, as did many of Sybil’s other family members. Sybil Decl., ¶¶ 3-4. Jerry ran the business after Abe retired, although Abe continued the make the decisions. Sybil Decl., ¶4. After Noah received an MBA in 1997, he began work for a competitor in New Orleans with Abe’s blessing. Sybil Decl., ¶5.

When Jerry died unexpectedly in January 2002 at age 55, Abe had no one to run the business. Sybil Decl., ¶6. When Noah returned to Los Angeles for the funeral, Abe asked Noah to stay. Sybil Decl., ¶6. Noah was key to reassuring employees they would be safe following Jerry’s death, and he grew to enjoy operating the business as he grew closer to Abe. Sybil Decl., ¶7.

In acknowledgement of Jerry’s and Noah’s work, Abe willed Noah 20% of Apex Drum and gave Sybil the other 80%, through their trusts. Sybil Decl., ¶8. Apex Drum stores its inventory on the Maple Vail Properties. Sybil Decl., ¶9. To ensure that Noah and Sybil continued to operate Apex Drum, Abe left Sybil a fifth property where they clean the drums. As a result, SF-Apex owns that property, which is not part of this litigation. Sybil Decl., ¶12.

Abe financed Bernard through medical school, at a cost totaling at least $500,000. Sybil Decl., ¶10. Abe asked Bernard to sell Sybil his share of the Maple Vail Properties and Bernard signed a document promising to do so within 60 days of Abe’s death. Sybil Decl., ¶11. After Abe died in 2016, Bernard failed to follow through on this promise. Sybil Decl., ¶14. Bernard’s inheritance always carried the understanding that the operation of family-owned businesses providing employment to his siblings and nephews superseded rental income. Sybil Decl., ¶26.

In 2017 and 2018, Noah and Sybil discovered that David was mismanaging the Maple Vail Properties by not disbursing funds held on behalf of Bernard and Sybil. Noah Decl., ¶2. David used these funds to renovate the “Ice House” building on the Maple Vail Properties for the use of a business that he and Nadine owned. Noah Decl., ¶2. Apex Drum and its employee were the only tenants paying rent, so Noah and Sybil stopped paying the rent to David and held it in SF-Apex. Noah Decl., ¶2.

In conversations occurring in 2019, the siblings agreed that Noah would manage the properties, especially since at the time they anticipated that Bernard would sell his one-third interest to Sybil. Noah Decl., ¶4, Ex. A (March 2020 email from David to insurance company that Noah had taken over management of the Maple Vail Properties). As that sale kept getting delayed, Noah and Sybil paid out the previously collected rents from the SF-Apex account until the Maple & Vail account was opened. Noah Decl., ¶5. Bernard never objected to Noah collecting the rent and tracking cashflow instead of David. Sybil Decl., ¶18.

Of the seven tenants currently occupying the Maple Vail Properties, two are family businesses. Sybil Decl., ¶15, Ex. C (rent roll). One is Apex Drum, and the other is Complete Demolition, Inc. (“Complete Demolition”), which is operated by Nadine. Sybil Decl., ¶15. The parties never agreed to share operating income of either company. Sybil Decl., ¶23. The $3,000 that Apex Drum pays in rent is the same now as it always has been except it is now in writing and with various options; Sybil does not understand why that is an issue when Nadine can do the same with Complete Demolition. Sybil Decl., ¶24.

There are three Apex Drum employee tenants, and the other two tenants are not connected to the family. Sybil Decl., ¶15. Noah found those tenants, collects rent, and manages taxes and expenses, including maintenance. Noah Decl., ¶7. Among the parties’ disputes is whether the Maple Vail Properties should be sold in a partition sale and for an accounting. Sybil thinks the properties should not be partitioned because there is no other real estate available at an affordable price for Apex Drum’s purposes. Sybil Decl., ¶16. Prioritizing a family business’s success over passive monthly rent is typical, including by charging below-market rent for the business and its employees. Srolovitz Decl., ¶8(a). There is no evidence of liability to a government entity or other issues. Srolovitz Decl., ¶8(a).

Apex Drum continues to pay $3,000 in monthly rent, and the residential tenants remain current on their rent. Complete Demolition has withheld its $1,000 rent since January 2020 with Myra’s approval. Sybil Decl., ¶17. The rent is collected by Maple & Vail, which is owned by Noah. Sybil Decl., ¶19. The rent is distributed to the co-owners when it exceeds expenses. Sybil Decl., ¶19. Apex Drum pays either the full year’s rent or half of it each January so that there are funds available for taxes and other expenses. Sybil Decl., ¶19.

Complete Demolition last paid $13,000 in December 2019, and residential tenants tend to pay multiple months of rent at a time for a total of $25,200 per year. Sybil Decl., ¶20; Noah Decl., ¶10. The accounting is simple, and the total annual revenue is less than $100,000 per year, as shown in income statements for the past three years. Sybil Decl., ¶21, Exs. D-F.

Because of the parties’ dispute as to whether legal fees for this litigation are properly paid from collected rent, in 2021 Noah reimbursed Myra one-third of her annual fees, or $16,000, before it wrote her a check for $14,591. Sybil Decl., ¶23, Exs. B, F.

The Maple Vail Properties are free for everyone to see. Noah Decl., ¶16. Any accounting claim can be resolved by a court without an expensive receivership. Noah Decl., ¶16.

In June 2006, Abe learned that his doctors expected him to live a long time. Henry Reply Decl., ¶2, Ex. 44 (video of Abe). This meant that he needed to take measures to financially provide for himself longer than planned, including finding a long-term lease for Apex Drum. Henry Reply Decl., ¶2, Ex. 44. He explained that he wanted to protect what he gave away and ensure it goes the way he intends without detriment to himself in his old age. Henry Reply Decl., ¶2, Ex. 44.

In March 2019, Noah asked Bernard to execute various agreements for the sale of his interest to Noah and Maple Vail in the March 2019 Agreements. Bernard Reply Decl., ¶5. Bernard did not receive Sybil’s signature on the Maple & Vail operating agreement until September 2020 and did not receive her signature on the Gift Transfer Acknowledgement until the end of July 2021, and Noah never paid anything towards the purchase price. Bernard Reply Decl., ¶¶ 6-7.

During his deposition on June 6, 2022, Noah admitted that while Apex Drum cannot exclude Myra and Bernard from the Maple Vail Properties, its lease may allow it to prevent them and anyone else from conducting business on the rented premises. Henry Reply Decl., ¶3, Ex. 45. This meant that Apex Drum has the exclusive right to sublease that property to other businesses, such as for filming, without the owners. Henry Reply Decl., ¶3, Ex. 45.

Defendant/Cross-Complainant Bernard applies for the appointment of Haddock as Receiver for the Maple Vail Properties pursuant to CCP sections 564(b)(1) and (b)(9). The Sybil Parties oppose.

Although the parties present a significant volume of evidence, the important facts are straightforward. Bernard, Myra, and Sybil are tenants-in-common for the Maple Vail Properties. Noah owns no legal interest in the properties. Since 2019, Noah has managed the Maple Vail Properties – the Sybil Parties say this occurred with the consent of Myra and Bernard and the latter deny giving their consent – and does so through Maple & Vail, a limited liability company owned by Noah and Sybil and managed by Noah as trustee of SF-Apex.

The Maple Vail Properties have historically been for the family’s Apex Drum business, which is now owned by Noah. There are six other tenants on the Maple Vail Properties, one if which is a business owned by Myra’s daughter, Nadine. All but two of the other tenants are employees of Apex Drum.

There is no dispute that Bernard has a legal interest in the Maple Vail Properties. He cites four categories of Noah’s conduct that make his interest in danger of loss: (1) Noah rented the Maple Vail Properties to Apex Drum in a long-term lease at below market rates and signed residential leases that were not in the owners’ interest; (2) he held Apex Drum’s rent initially in Apex-SF’s account and subsequently in Maple & Vail account; (3) he withheld profit distributions from owners Bernard and Myra; and (4) he commingled rent with his own funds and expenses, including the operating expenses for Maple & Vail.

Apex Drum had a month-to-month tenancy until 2020, when Noah negotiated a lease in which Apex Drum pays rent of $3,000 a month, which is the same rate as in 2006. Henry Decl., ¶¶ 10, 25, Ex. 19, 34. Also in 2020, Noah entered into three residential leases with Apex Drum employees through Maple & Vail. Henry Decl., ¶¶ 26-28, Exs. 35-37. Prior to Noah taking over management of the Maple Vail Properties, these employees had only oral, month-to-month leases. David Decl., ¶11. This was not the highest use of the property because the siblings had discussed tearing the houses down. David Decl., ¶11. Noah did not inform David, Myra, or Bernard that he was leasing to Apex Drum employees, at most saying he signed a lease with “the pallet guy” Ramirez, a non-employee. Bernard Decl., ¶21; David Decl., ¶10; Myra Decl., ¶¶ 7-8; Henry Decl., ¶30, Ex. 40.

Despite his conflict of interest, Noah did not inform either Myra or Bernard of the new Apex Drum lease until discovery in this litigation compelled him to, claiming that Bernard did not want to know. Bernard Decl., ¶20; David Decl., ¶9; Myra Decl., ¶6; Henry Decl., ¶8, Ex. 18. Noah has harmed the co-owners by refusing to raise the rent for Apex Drum or its employees to fair market value, claiming that (1) Apex Drum’s survival would be put at risk if it paid more rent; and (2) the employees cannot afford to pay more, although Apex Drum pays their rent as well. Bernard Decl., ¶25. Mot. at 11.

The Sybil Parties admit that Noah and Sybil own Apex Drum, thereby profiting from its reduced long-term rent in the new lease. Sybil Decl., ¶8. The Sybil Parties assert that Apex Drum’s status as a family business makes these lower rents understandable. In fact, Myra does the same for Nadine’s Complete Demolition business. Sybil Decl., ¶24; Srolovitz Decl., ¶8(a). When Abe transferred the Maple Vail Properties to his children, it was with the understanding that the needs of the family business have priority. Sybil Decl., ¶26. Opp. at 6,

Bernard asserts that there is no evidence that Abe intended to prioritize Apex Drum over rent. Abe only wanted to be sure that Apex Drum had a long-term lease during his lifetime. Reply at 5. In a video from June 2006, Abe said he wanted to protect what he was giving away without it being to his own detriment. Henry Reply Decl., ¶2, Ex. 44. This is not conclusive evidence that Abe had no long-term concern for the family business after his death, but his intent is not particularly significant either. Without a trust or will expressly imposing legal obligations on his children, Abe’s intent is only of moral or equitable significance.

The Sybil Parties add that they owe no fiduciary duty to Bernard because Sybil is a tenant-in-common. Joint tenancy, tenancy-in-common, tenancy by the entireties, joint property, common property, or part ownership does not by itself establish a partnership, even if the co-owners share profits made by the use of the property. Corporations Code §16202(c)(1). Thus, Sybil has no fiduciary duty to her fellow co-owners and can receive and retain rent subject to a claim in accounting by her fellow owners. Opp. at 7-8.

As the reply points out, this argument is a red herring. Bernard does not seek appointment of a receiver based on Sybil’s breach of a fiduciary duty; he seeks one based on the fiduciary duty by Noah and Maple & Vail. Reply at 11. A fiduciary relationship is any relation existing between parties to a transaction wherein one of the parties is duty bound to act with the utmost good faith for the benefit of the other party. Gilman v. Dalby, (2009) 176 Cal. App. 4th 606, 613. Traditional examples of fiduciary relationships include agent/principal. Id. at 614. There is no doubt that Maple & Vail and its manager Noah (as trustee of SF-Apex) are fiduciaries of the three co-owners in the management of the Maple Vail Properties.

While Bernard claims never to have authorized Noah to manage the Maple Vail Properties, he at least acquiesced in that arrangement. Henry Decl., ¶3, Ex. 14. A March 24, 2020 email shows that David deferred to Noah for purposes of insurance for the Maple Vail Properties. Sybil Decl., ¶18, Ex. A. Bernard admits that when Noah first began managing the properties in 2019, he (Bernard) let him do so to see if things would work out. Reply at 9. This acquiescence is not important, however, because Bernard points out that an agency relationship is at will and Bernard and Myra can terminate that agency at any time. Woolley v. Embassy Suites, Inc. , (1991) 227 Cal.Ap.3d 1520, 1529. Reply at 6.

Thus, Noah (and Maple & Vail) had a fiduciary duty to all co-owners. While Sybil may have consented to the Apex Drum’s long-term lease locked in at a non-market rate (see Sybil Decl., ¶24), Noah clearly breached his fiduciary duty to the other co-owners by entering into a lease that harms their interest by reducing their revenue stream on a long-term basis.

Bernard asserts that Noah withheld Apex Drum’s rent and instead paid it to SF-Apex, for which he is trustee, which he called “self-escrowing”. Henry Decl., ¶7, Ex. 17; RJN Ex. 42. Mot. at 11.

The Sybil Parties assert that Noah did so three years ago, in 2019. Apex Drum has paid all rent to Maple & Vail for the past three years. Sybil Decl., ¶21, Exs. D-F. Opp. at 10.

The facts that Noah historically withheld Apex Drum’s rent and that the company is current on its rent now show that there is no current rent dispute. But these facts highlight Noah’s conflict of interest. Noah’s and Sybil’s dispute over David’s management of the Maple Vail Properties does not justify Noah withholding rent as a tenant. Noah does not seem to understand that he wears a different hat as tenant than he does as property manager.

Where one of several cotenants has been in sole possession of the land, he is entitled to retain the products of his labor, but where he receives rents from third persons for the use of the land, he must account to his cotenants for their share. Dabney-Johnston Oil Corp. v. Walden, (1935) 4 Cal. 2d 637, 656.

Noah failed to distribute Bernard’s share of the rent for 2018 and 2019 until December 2019. Bernard Decl., ¶27, Ex. 2. He then refused a request to distribute rent for 2020 and 2021 even after the arbitration award affirmed Bernard’s interest in the Maple Vail Properties. Henry Decl., ¶4, Ex. 15. Separately, Noah rented part of the property to CBS Studios, and Sybil claimed she was the only one entitled to rent from that agreement. Bernard Decl., ¶26; Henry Decl., ¶20, Ex. 29.

As for CBS Studios, the Sybil Parties present evidence that the co-owners never agreed to share the operating income of the companies that rent space at the Maple Vail Properties. Sybil Decl., ¶23. During his deposition, Noah asserted that while Apex Drum could not exclude Myra and Bernard from the premises, it had the exclusive right to lease that space to other businesses. Henry Reply Decl., ¶3, Ex. 45. A tenant may sublease its premises unless there is a provision in the lease requiring the lessor’s consent. Neither party addresses this issue, and the court will assume that Apex Drum had the right to sublease. There remains the prospect, however, that Noah breached his fiduciary duty by permitting Apex Drum to usurp a business opportunity for the other two co-owners.

The Sybil Parties’ only defense to Noah’s failure to distribute profits on a timely basis is that the cost and uncertainty of litigation has impacted the distributions, which are relatively small given the small amount of net income usually generated by the Maple Vail Properties and the high cost of defending this litigation. Sybil Decl., ¶23, Exs. B, F. Opp. at 11.

As the reply notes, the Sybil Parties’ admission that they are defending this lawsuit by using the Maple Vail Properties’ rent shows that a receiver is necessary. The Sybil Parties are defending Bernard’s Cross-Complaint with his own money. Reply at 8. The Sybil Parties suggest that a preliminary injunction is more appropriate for enjoining this use of funds (Opp. at 9-10), which is true. But that does not make the failure to disburse funds to the co-owners a non-factor for the receivership issue.

Bernard accuses Noah of co-mingling accounts and using Maple Vail Properties’ rents for Apex Drum’s petty cash. Mot. at 11.

The Sybil Parties deny any use of properties’ rents for Apex Drum’s petty cash. Opp. at 10. Noah admits that he used SF-Apex’s account to hold Maple Vail Properties’ rent when he first suspected that David was mismanaging the funds. Noah Decl., ¶2. Noah insists that he transferred the full balance of “self-escrowed rent” to the Maple & Vail account once it opened. Noah Decl., ¶5.

Technically, this is co-mingling. But Noah did not misappropriate or misuse the co-mingled funds, and this is not a significant factor for a receivership.

A plaintiff who has been guilty of improper conduct connected with the controversy at hand will be denied by equity any recognition or relief with regard to the controversy. Moriarty v. Carlson, (1960) 184 Cal.App.2d 51. While equity does not demand that a plaintiff lead a blameless life as to other matters, it does require that he have acted fairly and without fraud or deceit as to the controversy in issue. The defense of unclean hands applies to both equitable and legal claims. Pond v. Insurance Co. of North America, 151 Cal.App.3d at 290.

The Sybil Parties argue that Bernard and Myra have unclean hands. Myra’s daughter Nadine no longer pays rent for her business Complete Demolition, and Myra’s husband’s mismanagement is what prompted Noah to assume responsibility. Sybil Decl., ¶17; Noah Decl., ¶2. Bernard failed to transfer his interest to Noah upon Abe’s death as he promised, and he should be precluded him from leveraging that interest here. Sybil Decl., ¶¶ 11, 14. Opp. at 9.

Whatever the viability of this unclean hands defense, it is irrelevant to whether a receiver should be appointed for the Maple Vail Properties. In determining the need for a receiver, the court is not finding anyone liable or determining the rights of any party. It is merely deciding whether the business should be run by a receiver.

Bernard has not shown any serious mismanagement by Noah (and Maple & Vail) in usual the sense of misappropriation, embezzlement, or violation of law where a receiver is appropriate. But he has shown Noah’s self-dealing and conflicts of interest in his actions. He also has shown that Noah is paying the Sybil Parties’ legal expenses with Bernard’s money, which appears clearly wrong.

The Sybil Parties assert that the appropriate remedy is an accounting, which Bernard has not sought. Opp. at 8. While the FACC does not state a cause of action for accounting, it does seek an accounting in its prayer for relief. In any event, an accounting performs an historical function, and a receivership is a forward-looking remedy. The former cannot replace the latter.

The Sybil Parties also argue that a receiver could do nothing because the Maple Vail Properties are completely rented. Opp. at 12. This argument assumes that the rents will automatically be paid, profits will be distributed to the co-owners, and the Maple Vail Properties will not be saddled with defense costs.

Most importantly, Bernard has shown that neither he nor Myra wants Noah to manage the Maple Vail Properties. If they consented to his management in 2019, that consent has since been withdrawn. The parties have not agreed on a property management company to manage Maple Vail Properties and there does not seem any real alternative to a receiver. Owens Decl., ¶¶ 3-4, Exs. 11-12.

The motion for appointment of a receiver is granted. The court has in mind the relatively modest rents generated by the Maple Vail Properties (less than $100,000 per year), as well as the probable inability of a receiver to unwind the Apex Drum lease or the other leases entered into by Noah, which are issues for trial. The receiver will be appointed as a rents and profits receiver with authority to collect rent, pay expenses (including not paying defense expenses if he so determines), and distribute profits, but not as a capital receiver who could make capital decisions for the properties such as by entering into new leases. Bernard is ordered to submit an order for the court’s signature consistent with this ruling on the Judicial Council rents and profits receiver form within two court days of the hearing.

Haddock is qualified and is appointed as the Receiver. While Bernard suggests that no bond is required because this is a noticed motion and not an ex parte application under CCP section 566(b) (Mot. at 15), he ignores the requirements of a receiver’s bond (CCP §567(b)) and a bond for a preliminary injunction in aid of the receiver (CCP §529(a)). The receiver’s bond will be $20,000 and Bernard shall post a preliminary injunction bond of $1500. A receiver’s status conference is set for December 8, 2022 at 9:30 a.m.

[1] Plaintiff Myra filed a notice of joinder to this motion. There is no legal authority for a joinder. If a joinder were permissible, it would require a supporting memorandum of points and authorities and be timely filed 16 court days before hearing under CCP section 1005. While Myra’s joinder is timely, it lacks a supporting memorandum. As such, it is merely a cheerleading effort for Bernard’s motion.

[2] Bernard requests judicial notice of Noah’s October 29, 2021 declaration in this action (RJN Ex. 42). The court need not judicially notice a document filed in the current action; a court is always free to review the court file.

The court has ruled on the Sybil Parties’ evidentiary objections. The clerk is directed to scan and file the court’s rulings.

[3] The Sybil Parties object to Bernard’s reply evidence. The court has considered only the evidence that may be properly considered in reply. See Regency Outdoor Advertising v. Carolina Lances, Inc., (1995) 31 Cal.App.4th 1323, 1333.