N.C. Ct. of Appeals: HSBC Bank v. PRMC, Inc.- Representation of Corporation by Non-Attorney

Summary:

In 2004, PRMC, through its president and sole shareholder, Zulfiquar M. Khan, borrowed $1,950,000 from Business Loan Center, L.L.C. (“BLC”), with the note including an “Unconditional Guarantee” from Mr. Khan and a Deed of Trust against a hotel and all personal property. In September 2007, Mr. Khan, PRMC and BLC agreed to a four month reduced payment on the note, with the allonge including a release (in bold and all capitals) by both parties of all claims against each other. This same language was again included in a July 2008 payment deferral agreement. BLC filed a Chapter 11 bankruptcy in September 2008, with its reorganization being confirmed on November 12, 2010. PRMC itself filed bankruptcy on November 1, 2010, during which HSBC, as the successor to BLC, sought relief from the automatic stay to foreclose on the hotel and personal property. Relief from stay was granted on in July 2011 and the PRMC bankruptcy was subsequently dismissed in October 2011, whereupon HSBC brought suit against both PRMC and Mr. Khan and also seeking to foreclose. As that suit progressed, the attorney for PRMC and Mr. Khan eventually withdrew and Khan sought a continuance of the matter both on his behalf personally and for PRMC.

The Court of Appeals began by dismissing the appeal of PRMC as Mr. Khan, who is not a licensed attorney, was prohibited from representing PRMC, a corporation. That it was only an appearance to request a continuance was not material.

Commentary:

The trial court could, upon granting a continuance for Mr. Khan personally, have sua sponte granted a continuance for PRMC, and perhaps should have shown greater care by holding as such. Similarly, it would seem a reasonable degree of courtesy and professionalism for counsel for HSBC to have agreed or even suggested such a continuance, although the case was already several years old and Mr. Khan had only very vague plans for obtaining a replacement attorney and had five previous lawyers. That notwithstanding, all courts should bear that on appeal, the assistance and patience that is often shown to corporate parties “represented” by non-attorney owners will not be as apparent or sustained on appeal. Whether the attempted appearance of a non-attorney owner in court for a corporation would be evidence that the corporation was a sham, allowing piercing of the corporate veil, was not addressed.

For a copy of the opinion, please see:

HSBC Bank v. PRMC, Inc.

About

1. Bachelor of Arts degree in English Literature from Washington University, 1993. 2. Juris Doctor degree from George Washington University, 1996. Admissions to Practice of Law: North Carolina Bar, 1996. Federal District Courts for the Eastern and Middle Districts of North Carolina. Specialty Certification: North Carolina State Bar: Certified as a Specialist in Consumer Bankruptcy. Areas of Practice: Practice limited to consumer and business debtor bankruptcy law, 1998 to present. Memberships: National Association of Consumer Bankruptcy Attorneys (NACBA). North Carolina Academy of Trial Lawyers (NCATL). North Carolina Bar Association, Bankruptcy Section. Lectures prepared and presented: North Carolina Academy of Trial Lawyers seminar on bankruptcy; Topic: Counseling the Consumer Debtor Prior to Court - C.Y.A. Forms to Help 'Gird They Loins'; 2001. Middle District Bankruptcy Seminar; Topic: Preparing Chapter 13 Plans; 2002. NACBA National Convention; Topic: Efficient Office Practices; 2003. NACBA National Convention; Topic: Chapter 7 vs. Chapter 13 Debates; 2004. Middle District Bankruptcy Seminar; Topic: Chapter 7 & 13 Hot Issues; 2004. Positions held: NACBA National Convention; Convention Chair; 2008. NACBA National Convention; Panel Moderator: Topic: Basic Bankruptcy Issues; 2008. NACBA National Convention; Panel Moderator; Topic: Chapter 13-Disposable Income and Other Issues; 2007. NACBA National Convention; Panel Moderator; Topic: Representing Members of the Military and Their Families; 2007. NACBA, Member of National Board of Directors, 2006 to present. NCATL, Chair of the Bankruptcy Section, 2003 to 2007. NACBA, Chair of the North Carolina Section, 2003 to 2007. NC Bar Association, Bankruptcy Section, Bankruptcy Council Member, 2004 to present.

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