HSBC Bank United States, Nat'l Ass'n v. PRMC, Inc.

IN THE COURT OF APPEALS OF NORTH CAROLINA
No. COA16-96
Filed: 6 September 2016
Robeson County, No. 11 CVS 02984
HSBC Bank USA, National Association, as successor trustee to Bank of America,
N.A., successor by merger to LaSalle Bank National Association, as Indenture
Trustee under that certain Indenture dated as of February 1, 2005, as the same may
be amended from time to time, for the benefit of the SBA and the holders of the
Business Loan Express SBA Loan-Backed Notes, Series 2005-1, as their interests
may appear subject to the Multi-Party Agreement dated February 1, 2005 by
Business Loan Center, LLC solely in its capacity as Servicer, Plaintiff,
v.
PRMC, Incorporated and Zulfiqar M. Khan, Defendants.
Appeal by defendants from order entered 28 May 2015 by Judge Mary Ann
Tally in Robeson County Superior Court. Heard in the Court of Appeals 9 June 2016.
Nexsen Pruet, PLLC, by David S. Pokela, Brooks F. Bossong, and Brian R.
Anderson, and Yarborough, Winters & Neville, P.A., by Garris Neil
Yarborough, for plaintiff-appellee.
Zulfiqar M. Khan, defendant-appellant pro se.
ZACHARY, Judge.
Where a corporation cannot appear pro se, we dismiss the corporation’s pro se
appeal. Where the trial court carefully considered the arguments of both sides, the
trial court did not abuse its discretion in denying Khan’s motion to continue. Where
defendant guarantor did not establish his right to assert claims on behalf of defendant
debtor corporation, defendant guarantor could not assert those claims. Where no
HSBC BANK USA V. PRMC, INC.
Opinion of the Court
genuine issue of material fact existed, the trial court did not err in granting plaintiff’s
motion for summary judgment against defendant guarantor.
I. Factual and Procedural Background
On 2 June 2004, Business Loan Center, LLC (BLC) loaned PRMC, Inc.
(PRMC), the amount of $1,950,000.00. Zulfiqar M. Khan (Khan), president and sole
shareholder of PRMC, executed an “Unconditional Guarantee” of the amount owed
under the note. Khan, in his capacity as president of PRMC, also signed a “Deed of
Trust, Assignment of Leases, Rents and Profits, Security Agreement and Fixture
Financing Statement,” granting BLC a security interest in certain real property,
namely a hotel, including all fixtures, and certain personal property, including future
personal property to be placed in and connected with the real property. On 20
September 2007, Khan and PRMC (collectively, defendants), executed with BLC an
Allonge to the note, which reduced the monthly payment on the note for four months.
The Allonge included the following language:
WHEREAS, BORROWER AND GUARANTOR EACH,
AND ANY COMBINATION AND COLLECTIVELY,
HEREBY FULLY AND FOREVER REMISE, RELEASE
AND DISCHARGE LENDER, AND THEIR OFFICERS,
AGENTS AND EMPLOYEES, OF AND FROM ANY AND
ALL CLAIMS AND FROM ANY AND ALL OTHER
MANNER OF ACTION AND ACTIONS, CAUSE OR
CAUSES OF ACTION, RIGHTS, CLAIMS,
COUNTERCLAIMS, DEFENSES, SUITS, SET OFFS,
DEBTS, DUES, SUMS OF MONEY, ACCOUNTS,
COVENANTS, CONTRACTS, CONTROVERSIES,
OBLIGATIONS, LIABILITIES, AGREEMENTS,
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Opinion of the Court
PROMISES, VARIANCES, TRESPASSES, DAMAGES,
JUDGMENTS, LIENS, CLAIMS OF LIEN, LOSSES,
COSTS, EXPENSES, JUDGMENT BONDS, EXECUTION
AND DEMANDS OF EVERY NATURE AND KIND
WHATSOEVER, IN LAW AND IN EQUITY, EITHER
NOW ACCRUED OR HEREAFTER MATURING, WHICH
ANY OF THEM HAD, MAY HAVE HAD, OR NOW HAVE,
OR CAN, SHALL OR MAY HAVE, FOR OR BY REASON
OF ANY MATTER, CAUSE OR THING WHATSOEVER,
TO AND INCLUDING THE DATE HEREOF, ARISING
OUT OF OR CONNECTED IN ANY WAY WITH THE
INSTRUMENTS REFERENCED IN THE RECITALS,
LENDER'S, AND/OR THEIR AGENTS', CONDUCT AND
ACTIONS WITH RESPECT THERETO AND LENDER'S
GENERAL BUSINESS RELATIONSHIP WITH ANY OF
THEM, INCLUDING, BUT NOT LIMITED TO, THE
NEGLIGENCE, OF LENDER; PROVIDED, HOWEVER,
LENDER IS NOT RELEASED FROM ITS OBLIGATIONS
UNDER THIS AGREEMENT.
On 10 July 2008, defendants and BLC executed a Deferral Agreement in which
BLC granted PRMC’s request for a two month deferral on payments. This agreement
contained another release of claims, counterclaims and defenses, in bold print.
On 30 September 2008, BLC filed for bankruptcy. On 2 September 2010, BLC
filed its plan of reorganization, which was confirmed on 12 November 2010 and
became effective on 29 November 2010. BLC served defendants with notice of the
case and important bankruptcy proceedings, but neither PRMC nor Khan filed a proof
of claim.
Thereafter, PRMC defaulted on the note. BLC instituted foreclosure
proceedings under the note, and in order to prevent foreclosure, defendants executed
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Opinion of the Court
a Forbearance Agreement with BLC on 1 October 2009. In the Forbearance
Agreement, there was another release of claims, with similar language and in
similarly bold typeface.
On 1 November 2010, PRMC filed for bankruptcy. In its Schedule A filing,
PRMC declared the amount of secured interest in its real property to be
$2,050,293.81. On the Schedule B filing of personal property, PRMC listed no present
or future legal claims as assets. On 21 April 2011, BLC’s successor in interest, HSBC
Bank USA (HSBC), filed a motion for relief from the automatic stay, noting that the
property was worth less than the debt. On 3 June 2011, the bankruptcy court entered
a consent order modifying the automatic stay, recognizing that HSBC’s security
interest was perfected and that the property constituted “cash collateral,” and lifting
the automatic stay with respect to the property. On 17 October 2011, the bankruptcy
court dismissed the bankruptcy case with prejudice.
On 20 October 2011, HSBC brought an action against defendants, alleging
default of the agreement by PRMC and default of the guaranty by Khan, and seeking
monetary damages.
On 26 October 2011, HSBC brought an action to foreclose on the note and deed,
alleging another default. Defendants did not appeal from the resultant findings and
order. The property was ultimately sold by the trustee at public auction.
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Opinion of the Court
On 3 January 2012, defendants filed answer and counterclaims to HSBC’s
complaint, seeking dismissal, asserting multiple defenses, alleging breach of
fiduciary duty by HSBC, and seeking damages. On 14 May 2014, HSBC filed an
amended reply to defendants’ counterclaims. On 2 June 2014, defendants filed an
amended motion to dismiss, answer, and counterclaim.
On 24 June 2014, HSBC filed a motion for summary judgment, and included
copies of the BLC bankruptcy proceeding, the PRMC bankruptcy proceeding, the
Allonge, and the PRMC receivership and foreclosure proceedings. On 4 August 2014,
hearing on this motion was continued at the request of defense counsel. On 23
February 2015, HSBC filed a notice of hearing on its motion. On 3 March 2015,
defendants filed a motion to continue the hearing on HSBC’s motion, alleging HSBC’s
failure to comply with discovery. On 10 March 2015, the trial court continued the
hearing until 20 March 2015.
On 13 March 2015, defense counsel filed a request to withdraw, and moved for
a continuance in order for defendants to seek other counsel. On 18 March 2015, the
trial court entered an order allowing defense counsel’s motion to withdraw, and
continuing the case for sixty days.
On 14 May 2015, HSBC filed another notice of hearing on its motion. On 21
May 2015, defendants, now appearing pro se through Khan, moved for an additional
continuance in order to procure counsel. At the hearing on 27 May 2015, the trial
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Opinion of the Court
court denied defendants’ motion to continue, and heard HSBC’s motion for summary
judgment. On 28 May 2015, the trial court entered an order granting summary
judgment in favor of HSBC.
From the order granting summary judgment in favor of HSBC, defendants
appeal.
II. PRMC’s Appeal
As a preliminary matter, we note that while an individual may appear pro se
before the court, a corporation is not an individual under North Carolina law, and
must be represented by an agent. Seawell v. Carolina Motor Club, 209 N.C. 624, 631
184 S.E. 540, 544 (1936) (holding that “[a] corporation cannot lawfully practice law.
It is a personal right of the individual,”). Further, a corporation cannot appear pro
se; it must be represented by an attorney licensed to practice law in North Carolina,
pursuant to certain limited exceptions. Lexis-Nexis, Div. of Reed Elsevier, Inc. v.
Travishan Corp., 155 N.C. App. 205, 209, 573 S.E.2d 547, 549 (2002). These
exceptions include the drafting by non-lawyer officers of some legal documents, and
appearances in small claims courts and administrative proceedings.
The instant case fell within none of these exceptions. The matter now on
appeal concerns a trial involving a nearly two million dollar loan. As such, it was
error for the trial court to allow PRMC to appear pro se through its president, Khan.
In addition, we hold that PRMC cannot appear before this Court pro se. As such, its
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Opinion of the Court
appeal to this Court is not perfected. We will hear Khan’s own appeal, as he, as an
individual, may proceed pro se, but dismiss PRMC’s appeal.
III. Motion to Continue
In his first argument, Khan contends that the trial court erred in denying
defendants’ motion to continue. We disagree.
A. Standard of Review
“The standard of review for denial of a motion to continue is generally whether
the trial court abused its discretion.” Morin v. Sharp, 144 N.C. App. 369, 373, 549
S.E.2d 871, 873, disc. review denied, 354 N.C. 219, 557 S.E.2d 531 (2001).
“A trial court may be reversed for abuse of discretion only upon a showing that
its actions are manifestly unsupported by reason . . . [or] upon a showing that [the
trial court’s decision] was so arbitrary that it could not have been the result of a
reasoned decision.” White v. White, 312 N.C. 770, 777, 324 S.E.2d 829, 833 (1985).
B. Analysis
Khan contends that, as of the hearing on the motion of PRMC and Khan for
further continuance, discovery was yet incomplete. Khan argues that, as a result, a
hearing on summary judgment was premature, and the matter should have been
continued until discovery was complete.
We note first that this was not the argument Khan made in the motion to
continue. The motion stated, simply, that defendants needed time “in order for
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Opinion of the Court
defendant to procure counsel and prepare.” It was only at the hearing on this motion
that Khan raised arguments concerning discovery issues.
At the hearing, Khan stated that he had “spoken with actually a couple of
lawyers[,]” and that one had told him that “he is going to look into this case and be
able to represent me.” Khan went on to explain that he had spoken to multiple
attorneys, and that as he was based in Richmond, Virginia, following these
proceedings was difficult for him. He also mentioned that his father was suffering
from Parkinson’s, and that this had kept him preoccupied of late.
In response to the motion, HSBC argued that “this whole series of events is
replete with delay by Mr. Khan.” HSBC remarked upon the delays resulting from
the Forbearance Agreement, the foreclosure, and PRMC’s bankruptcy. HSBC then
noted that its summary judgment motion had originally been set for 7 July 2014. It
was continued, at defendants’ request, to 3 March 2015, again to 6 March 2015, and
then again to 20 March 2015. HSBC observed further that defendants’ attorney
handled all appropriate responses, pleadings, and motions before withdrawing.
Subsequently, the matter was continued to 27 May 2015. With respect to defense
counsel, HSBC noted that the attorney that Khan mentioned was an excellent
attorney, but that defendants had already had five attorneys in this case, and the
attorney Khan mentioned would be the sixth. HSBC stated that the case itself, which
started with a complaint filed 20 October 2011, had been pending for nearly four
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HSBC BANK USA V. PRMC, INC.
Opinion of the Court
years, and had been calendared for five summary judgment hearings. Lastly, HSBC
argued that a hearing wasn’t even particularly necessary. HSBC maintained:
But everything that can be done in this case -- because one
of the things, if I’m not mistaken, that you said during this
-- during these hearings is we’re through filing papers in
this. There’s no more discovery. There’s no more motions.
There’s no more anything because, you know, the deadlines
for -- when you have to file your briefs, the deadlines for
when you have to file your affidavits, the deadlines when
you have to -- discovery was extended additional time to
give him additional time. Your Honor, they’re -- and that
has been completed.
Your Honor, there is nothing of a factual basis that needs
to be considered in this case. All of our defenses come
straight from the paperwork itself.
Khan responded by challenging the number of attorneys and the cause of the
delays. He then challenged the discovery issue, arguing that, “We still have questions
and things. Emails -- I have not gotten. I have about thousand [sic] of pages of emails
but they are irrelevant emails talking about the reservation systems among
themselves and all that. We have not gotten an -- one email that -- I have not seen,
ma’am -- if I have missed it, that’s -- I’m sorry.” Subsequently, the trial court denied
defendants’ motion for a continuance. The trial court questioned whether defendants
actually had an arrangement with the lawyer Khan mentioned, observing that “if [the
attorney] was prepared to appear on your behalf, I believe that he would have notified
the Court and opposing counsel even if he could not be here today because that’s the
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Opinion of the Court
usual method of communication.” The trial court determined that “[t]here just comes
a point in time when matters need to be resolved one way or the other.”
Upon review of the transcript, records, and briefs, we agree. The trial court
gave ample consideration to both sides. It expressed sympathy for defendants’
position, but noted that the pendency of the case was verging on an unacceptable
length. We hold that the trial court’s decision was not “manifestly unsupported by
reason” or “so arbitrary that it could not have been the result of a reasoned decision.”
White, 312 NC at 777, 324 S.E.2d 833. Accordingly, we hold that the trial court did
not abuse its discretion in denying Khan’s motion to continue.
This argument is without merit.
III. Summary Judgment
In his second argument, Khan contends that the trial court erred in granting
HSBC’s motion for summary judgment. We disagree.
A. Standard of Review
“Our standard of review of an appeal from summary judgment is de novo; such
judgment is appropriate only when the record shows that ‘there is no genuine issue
as to any material fact and that any party is entitled to a judgment as a matter of
law.’” In re Will of Jones, 362 N.C. 569, 573, 669 S.E.2d 572, 576 (2008) (quoting
Forbis v. Neal, 361 N.C. 519, 524, 649 S.E.2d 382, 385 (2007)).
B. Analysis
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Opinion of the Court
Khan contends on appeal that BLC, HSBC’s predecessor in interest, “acted in
such a manner dealing with the Defendants . . . as to constitute intentional
wrongdoing and willful misconduct as well as acting in a grossly negligent manner.”
Khan specifically asserts that an employee of BLC acted as more than a mere lender,
creating a fiduciary relationship. As a result, Khan maintains that there was a
genuine issue of material fact, and that summary judgment was not appropriate.
Khan’s arguments notwithstanding, the issue on summary judgment was not
any claim by Khan concerning fraud. In fact, Khan made no counterclaim alleging
fraud. Rather, Khan alleged that a fiduciary duty had been created, and was
breached. This was, if any, the only factual issue.
More specifically, Khan contended that an employee of BLC had established a
fiduciary relationship with PRMC, which was breached, causing injury to PRMC.
Khan, as an individual, has not articulated a right to appeal this issue, which we note
damages the corporation, not Khan individually.
Ultimately, there is no genuine issue of material fact. PRMC’s appeal to this
Court has been dismissed; the remaining appellant is Khan, in his individual
capacity. Khan, as an individual, has failed to express a right to appeal the issue of
a breach of fiduciary duty that damaged PRMC, and therefore has failed to raise a
genuine issue of material fact. Accordingly, we hold that there was no genuine issue
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Opinion of the Court
of material fact as to whether Khan owed the debt alleged, and the trial court did not
err in granting HSBC’s motion for summary judgment.
This argument is without merit.
V. Conclusion
PRMC cannot proceed pro se on appeal, and as such PRMC’s appeal is
dismissed. The trial court did not abuse its discretion in denying Khan’s motion to
continue. Khan, as an individual, has failed to articulate his right to appeal from
summary judgment of a claim for breach of fiduciary duty allegedly damaging PRMC.
As a result, we hold that the trial court did not err in granting HSBC’s motion for
summary judgment.
DISMISSED IN PART, AFFIRMED IN PART.
Judges STEPHENS and McCULLOUGH concur.
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