Pelc v. Pham ( 2023 )

IN THE COURT OF APPEALS OF NORTH CAROLINA
2023-NCCOA-2
No. COA22-175
Filed 17 January 2023
Mecklenburg County, No. 16 CVD 16819
JAMES HOWARD PELC, Plaintiff,
v.
MONICA ELIZABETH PHAM, Defendant.
Appeal by defendant from judgment entered 7 June 2021 by Judge Christy T.
Mann in Mecklenburg County District Court. Heard in the Court of Appeals
29 November 2022.
Arnold & Smith, PLLC, by Matthew R. Arnold and Ashley A. Crowder, for the
plaintiff-appellant.
Miller Bowles Cushing, PLLC, by Brett Holladay, for the plaintiff-appellant.
Thurman, Wilson, Boutwell & Galvin, P.A., by John D. Boutwell for the
defendant-appellee.
TYSON, Judge.
¶1 James Howard Pelc (“Father”) appeals from order entered on 7 June 2021,
which awarded to Monica Elizabeth Pham (“Mother”): (1) monetary damages under
an United States Citizenship and Immigration Services (“USCIS”) Form I-864
Affidavit of Support; (2) equitable damages for Father’s failure to repay a loan; and,
(3) attorney’s fees for Mother’s Affidavit of Support claims. The order also denied
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attorney’s fees for both Mother’s and Father’s child custody claims. We affirm in part,
reverse in part, and remand.
I. Background
¶2 Father and Mother began a romantic relationship in Perth, Australia, and
began cohabitating in 2007. The relationship evolved into a “de facto relationship”
per Australian law, which is analogous to a common-law marriage. Mother and
Father are parents of one minor son born on 26 June 2009. The parties resided in
Australia until 2014, when they moved to the United States (U.S.).
¶3 Father holds dual citizenship in the U.S. and Australia. Mother holds dual
citizenship in Australia and New Zealand. Their son is a U.S. and Australian citizen
because Father is a U.S. citizen. At the time of trial, Father was 62 years old, and
Mother was 50 years old.
¶4 Father desired to return to the U.S. in 2014 to be closer to his aging parents.
Mother was reluctant, but she agreed to move “on a trial basis” to determine whether
she would enjoy living in the U.S. Mother was required to obtain a Fiancée Visa prior
to immigrating and entering the U.S. Mother and Father completed and signed a
USCIS Form I-134, entitled “Intent to Marry,” and confirmed their intent to marry
within ninety days upon entry into the U.S. Mother and Father married on 21 July
2014 in the U.S.
¶5 For Mother to remain in the U.S., Father also signed and submitted a USCIS
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Form I-864, titled an “Affidavit of Support,” on 7 August 2014. The Affidavit of
Support allows the “intending immigrant [to] establish that he or she is not
inadmissible to the United States as an alien likely to become a public charge” by
requiring the future spouse to promise to financially support the alien.
¶6 The trial court found Father “represented that he was not working but had
assets and income from his property from which to support [M]other” on the USCIS
Form I-864. Father signed the USCIS Form I-864 Affidavit of Support, promising to
maintain his alien wife, an Australian/New Zealand citizen, for her to lawfully
remain in the United States for permanent residence.
¶7 The parties resided together in the U.S. with the minor son until they
separated on 4 November 2016. Father failed to pay any support to Mother after the
parties separated.
¶8 From November 2016 until April 2017, the parties “nested” with the minor son,
meaning “Mother and Father would alternate weeks living in Father’s residence with
the minor child.” The parties eventually stopped “nesting” with their son. The parties
have maintained separate households since April 2017.
¶9 Neither Mother nor Father were employed for 2014 through 2017. Father has
not maintained traditional employment since February 2014. Mother resigned from
her job in Australia when she moved to the U.S., per Father’s request. Mother,
however, later secured a part-time employment during 2018 and a full-time position
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in 2019.
¶ 10 Prior to moving to the U.S., Father identified various properties located in
different geographic areas. He intended to use one as the family home, and another
to be used as a rental property to generate income. In May 2013, Father purchased
residential property located in Charlotte. He also purchased property located in
Suwanee, Georgia, in August 2013, which he hoped to rent.
¶ 11 Prior to closing on the property in Suwanee, Mother offered funds to Father to
avoid financing the property through a traditional loan and borrowing from a lender.
Mother was to receive equity in the home for her investment, or alternatively, Father
promised to re-pay Mother the interest she was obligated to pay on her on separate
line of credit. Mother provided $110,000 Australian dollars (“AUD”) to Father in two
transactions on 11 and 12 June 2013, which Father subsequently transferred to a
U.S. bank account and, upon conversion, received currency proceeds of $104,099 U.S.
Dollars (“USD”). Father used those funds to partially purchase the property in
Suwanee.
¶ 12 The trial court found that Mother “trusted Father” because of their personal
relationship, and Mother considered the transaction as a “loan to Father and not a
gift.” The trial court also found Mother had relied upon Father’s promises to re-pay
the funds loaned from her line of credit and her reliance was reasonable.
¶ 13 Father paid Mother $4,071 towards the loan proceeds in 2013 and part of 2014,
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which amount equaled the interest accruing on Mother’s line of credit. Father
subsequently stopped paying Mother in 2014. In one of Father’s responses to a
motion before the trial, he “admitted that Mother had loaned him the money,
admitted that he had paid for a time on the loan, and admitted that it had not been
paid in full.” Father sold the Suwanee property for a profit in 2018. Father did not
re-pay Mother any of the proceeds from the sale nor make any additional payments
on the loan.
¶ 14 Following the dissolution of Mother’s and Father’s relationship in late 2016,
Father initiated this litigation after Mother had threatened to take their minor son
back to Australia. He sought permanent child custody, temporary emergency
custody, and, in the alternative, a motion for temporary parenting arrangement. The
litigation has sadly proceeded in a protracted, expensive, contentious, and a highly-
conflicted manner since it began.
¶ 15 Mother counterclaimed for a decree of divorce, child custody, child support,
attorney’s fees, recovery of personal property, monetary damages resulting from
breach of contract for support, specific performance of the contract for support,
equitable distribution, interim allocation, postseparation support, alimony, unjust
enrichment, constructive trust, and resulting trust.
¶ 16 Mother voluntarily dismissed her post-separation support, alimony, and
temporary and permanent child support claims without prejudice when trial began.
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The remaining claims were tried between 9-11 December 2019. No written order was
entered until eighteen months later on 7 June 2021.
¶ 17 The trial court found and concluded: (1) Father owed Mother damages for
failing to meet his contractual obligation under the USCIS Form I-864 Affidavit of
Support; (2) Mother’s claim for quantum meruit/unjust enrichment should be granted
for the funds Mother provided to finance the purchase of the Georgia rental home and
awarded Mother $100,028 USD, the converted amount of the funds minus the
payments Father made in 2013 and 2014, together with $33,697.10 USD in interest;
(3) Mother’s claim for attorney’s fees arising out of the Affidavit of Support should be
allowed in the amount of $20,000 USD; and, (4) both Mother and Father’s claims for
attorney’s fees related to the child custody agreement should be denied. Father
timely appealed on 6 July 2021.
II. Appellate Jurisdiction
¶ 18 Jurisdiction lies in this Court pursuant to N.C. Gen. Stat. § 7A-27(b)(2) (2021).
III. Issues
¶ 19 Father presents extensive arguments regarding the trial court’s order on
appeal. Those arguments relate to the trial court’s findings regarding: (1) the USCIS
Form I-864 Affidavit of Support; (2) Mother’s loan to Father to purchase the property
located in Suwanee, Georgia; and, (3) the award of mother’s attorney’s fees for those
fees related to the Affidavit of Support.
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¶ 20 Father also argues he was prejudiced and should be granted a new trial
because: (1) a hearing conducted after trial, but before entry of the final order, allowed
Mother to make additional arguments; and, (2) certain portions of the trial transcript
are missing due to technological glitches.
IV. Affidavit of Support
¶ 21 Father first argues the trial court lacked subject matter jurisdiction to
adjudicate Mother’s Affidavit of Support claim for 2017 and 2018. Father asserts he
could only be in breach of the agreement at the end of each year, because the trial
court uses the annual income of the sponsored alien immigrant to determine whether
he breached his obligations under the Affidavit of Support. He argues Mother should
have brough forth new claims regarding Defendant’s breach at the end of each year
during the litigation.
¶ 22 Father also argues the trial court erred by considering the 125% of the Federal
Poverty Level (“FPL”) Guidelines values for a two-person household instead of a one-
person household when determining whether Mother’s annual income fell below the
125% FPL threshold. He similarly asserts the trial court erred by excluding certain
tax-deductible depreciation expenses from mother’s income when calculating
damages. If those tax deductions were not excluded from Mother’s income and the
trial court applied the guidelines for a one-person household, Father argues he would
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not owe Mother damages for breaching his contractual obligations under the USCIS
Form I-864 Affidavit of Support.
¶ 23 The following chart compares the 125% FPL Guidelines for both household
sizes for the years the trial court awarded Mother damages arising from Father’s
obligations under the Affidavit of Support. Although Mother also sought damages for
2015, the trial court did not award damages for that year because her income
exceeded the FPL Guidelines for a two-person household in 2015.
125% of the Federal Poverty Level Guidelines (in USD)
Year One-Person Household Two-Person Household
2016 $ 14,850 $ 20,025
2017 $ 15,075 $ 20,300
2018 $ 15,175 $ 20,575
¶ 24 Mother’s adjusted gross income on her federal tax returns for the requisite
years is displayed in the table below, along with Mother’s income without deducting
her depreciation expenses:
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Mother’s Income Before Subtracting
Mother’s Adjusted Gross Income
Depreciation Expenses
Year Amount in USD Year Amount in USD
2016 $ 8,511 2016 $18,066
2017 $ 7,173 2017 $16,728
2018 $ 6,703 2018 $16,258
A. Subject Matter Jurisdiction
¶ 25 Mother asserted a breach of contract claim in her First Amended Answer and
Counterclaims, filed on 13 December 2016. Father argues the only possible year the
trial court possessed subject matter jurisdiction over Mother’s claim for damages
arising from the Affidavit of Support was 2016, and he asserts the “threshold for
determining liability under the Affidavit of Support is 125% of the [FPL], [which is]
calculated on an annual level, rather than monthly [basis].” Mother renewed her
claim in her Second Amended Answer and Counterclaims filed on 14 February 2017.
Defendant asserts his potential liability for 2017 and 2018 was speculative, as 2017
had not ended when Mother renewed her claim and 2018 had not begun, making both
claims premature and not “ripe.”
1. Standard of Review
¶ 26 “Whether a trial court has subject-matter jurisdiction is a question of law,
reviewed de novo on appeal.” McKoy v. McKoy, 202 N.C. App. 509, 511, 689 S.E.2d
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590, 592 (2010) (citation omitted). “Subject-matter jurisdiction involves the authority
of a court to adjudicate the type of controversy presented by the action before it.” Id.(citation and internal quotation marks omitted).
2. Suozzo v. Suozzo
¶ 27 The defendant in Suozzo v. Suozzo argued “the trial court erred by awarding
damages for the monthly installments that became due only after Wife commenced
th[e] action,” because “[w]ife did not sue for claims which came due subsequent to the
filing [of] the complaint.” __ N.C. App. __, 2022-NCCOA-620, ¶ 10, 876 S.E.2d 915(2022) (unpublished) (internal quotation marks and alterations omitted). This Court
held the trial court did not err by awarding damages for monthly installments the
defendant-husband had missed after wife had filed her complaint. Id. ¶ 13. Wife did
not “limit her prayer for relief to the recovery of installments prior to the filing of her
complaint” and she prayed for “‘all damages incurred as a result of Defendant’s
breach’ and for ‘such other and further relief as the Court may deem just and proper.’”
Id. ¶ 12.
¶ 28 Here, Mother was not required to renew her breach of contract claim arising
under the USCIS Affidavit of Support at the end of each new year the litigation
proceeded into, as she had prayed for all monetary damages resulting from Father’s
breach and “such other and further relief [as] the Court may deem just and proper.”
Id. ¶ 13.
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¶ 29 North Carolina courts have jurisdiction to adjudicate breach of contract claims
deriving from a supporting spouse’s failure to comply with an Affidavit of Support.
See Zhu v. Deng, 250 N.C. App. 803, 794 S.E.2d 808 (2016). The trial court possessed
subject-matter jurisdiction to hear and adjudicate Mother’s claims under her prayer
for relief for Father’s breach as they accrued for the years 2017 and 2018. Father’s
argument is overruled.
B. USCIS Form I-864 Affidavit of Support
1. Standard of Review
¶ 30 The contents of a USCIS Form I-864 Affidavit of Support “are specified in 8
U.S.C. § 1183a, and . . . [are] [ ] an issue of statutory interpretation.” Id. at 817, 794
S.E.2d at 817 (citation omitted). “Questions of statutory interpretation are questions
of law, which are reviewed de novo by an appellate court.” Martin v. N.C. Dep’t. of
Health & Human Servs., 194 N.C. App. 716, 719, 670 S.E.2d 629, 632 (2009) (citation
and quotation marks omitted); Anderson v. Anderson, 840 F. App’x 92, 94 (9th Cir.
2020) (unpublished) (explaining that whether the court correctly instructed the jury
they were allowed to consider TRICARE health insurance benefits and a judgment
for attorney’s fees as “income” should be reviewed de novo, not for an abuse of
discretion, because the appellate court was determining “whether the challenged
instruction correctly state[d] the law”).
2. Analysis
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¶ 31 Federal statutes in the U.S. Code mandate compliance with certain
immigration requirements before an alien from another country or jurisdiction may
lawfully enter sovereign borders of the United States. A potential immigrant or “alien
who . . . is likely at any time to become a public charge is inadmissible,” and cannot
lawfully enter, although if properly filed, “the consular officer or the Attorney General
may also consider any [A]ffidavit of [S]upport under section 1183a of this title” before
reaching a decision about whether to allow entry. 8 U.S.C. § 1182(a)(4)(A)-(B)(ii)
(2018).
¶ 32 A United States citizen, or a “lawfully admitted” alien, may “sponsor” an
immigrant or alien petitioning for admission and lawful entry into the United States
by signing an Affidavit of Support USCIS Form I-864A contract and promising “to
maintain the sponsored alien at an annual income that is not less than 125 percent
of the [FPL].” 8 U.S.C. § 1183a(a)(1)(B), (f)(1) (2018).
¶ 33 “Form I-864A is considered a legally enforceable contract between the sponsor
and the sponsored immigrant.” Zhu, 250 N.C. App. at 807, 794 S.E.2d at 812 (citation
and internal quotation marks omitted). The sponsoring spouse is, nevertheless, only
obligated to pay the sponsored immigrant if the immigrant’s income is less than 125%
of the FPL for the requisite household size. 8 U.S.C. § 1183a(a)(1)(A); Zhu, 250 N.C.
App. at 807, 794 S.E.2d at 812 (citation omitted); Barnett v. Barnett, 238 P.3d 594,
598-99 (Alaska 2010) (explaining “[e]xisting case law supports the conclusion that a
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sponsor is required to pay only the difference between the sponsored non-citizen’s
income and the 125% of [FPL] threshold” and denying support for any amount above
the 125% threshold because “the parties have referred us to no authority supporting
the proposition that federal law requires a sponsor to pay spousal support when the
sponsored non-citizen’s earned income exceeds 125% of the [FPL]”).
¶ 34 “The sponsor’s obligation under the affidavit does not terminate in the event of
divorce.” Id. (citation and quotation marks omitted); Erler v. Erler (Erler I), 824 F.3d
1173, 1177 (9th Cir. 2016) (“[U]nder federal law, neither a divorce judgment nor a
premarital agreement may terminate an obligation of support.”); Wenfang Liu v.
Mund, 686 F.3d 418, 419-20 (7th Cir. 2012) (explaining the “right of support conferred
by federal law exists apart from whatever rights [a sponsored alien] might or might
not have under [state] divorce law”).
¶ 35 In addition, “child support is a financial obligation to one’s non-custodial child,
not a monetary benefit to the other parent. . . . [C]hild support payments do not offset
the defendant’s obligation under the affidavit.” Younis v. Farooqi, 597 F. Supp. 2d
552, 555 (D. Md. 2009).
a. Household Size
¶ 36 The federal regulation defining the terms used in the USCIS Form I-864
Affidavit of Support provides: “Income means an individual’s total income (adjusted
gross income for those who file IRS Form 1040EZ) for purposes of the individual’s
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U.S. Federal income tax liability, including a joint income tax return[.]” 8 C.F.R.
§ 213a.1. This definition, however, only defines “income” for the supporting spouse,
and not the dependent spouse intending to lawfully immigrate and enter. See Flores
v. Flores, 590 F. Supp. 3d 1373, 1380 (W.D. Wash. 2022) (citation omitted) (“The
Immigration and Nationality Act [ ] does not define income with respect to the
sponsored immigrant.”).
¶ 37 North Carolina’s courts have never defined “income” for the purpose of
determining what amount a supporting spouse is obligated to pay a dependent
spouse, who they agreed to sponsor by signing an USCIS I-864 Affidavit of Support,
and this issue is of first impression. The approaches other courts have taken, when
resolving the issue of which household size may be considered to calculate damages,
is persuasive guidance, although not binding. N.C. Ins. Guar. Ass’n v. Weathersfield
Mgmt., 268 N.C. App. 198, 203, 836 S.E.2d 754, 758 (2019) (citation omitted) (“When
this Court reviews an issue of first impression, it is appropriate to look to decisions
from other jurisdictions for persuasive guidance.”).
¶ 38 In Flores, a couple were parents of three children: two children who “were born
after Plaintiff immigrated to the United States and, therefore, are citizens of the
United States,” and one lawfully residing child who was a “citizen of the Philippines
and Lawful Permanent Resident of the United States.” Flores, 590 F. Supp. 3d at
1378 n.1. When the supporting spouse in Florer submitted the USCIS Form I-864
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Affidavit of Support, only the first child, who was a citizen of the Philippines, was
listed on the form along with the dependent spouse. Id. (citing Erler I, 824 F.3d at
1180).
¶ 39 The court in Florer held the supporting spouse only agreed to sponsor both the
dependent spouse and their first child, per the terms of the contractual agreement in
the Affidavit of Support. Id. The supporting spouse did not agree to sponsor the two
children who were U.S. citizens. Id. The proper household size used to calculate the
supporting spouse’s obligation was two, not four. Id. (citing Erler I, 824 F.3d at 1180(“If the sponsor agreed to support more than one immigrant, and those immigrants
separate from the sponsor’s household and continue to live together, then the sponsor
must provide them with whatever support is necessary to maintain them at an
annual income of at least 125% of the [FPL] guidelines for a household of a size that
includes all the sponsored immigrants.”)).
¶ 40 The reasoning in Florer is supported by two independent lines of reasoning.
First, children who are U.S. citizens are not aliens capable of becoming a “public
charge” under the immigration statutes. See 8 U.S.C. § 1182(a)(4) (explaining that
an “alien who . . . is likely at any time to become a public charge is inadmissible”)
Second, given the contractual nature of the Affidavit of Support, the supporting
spouse in Florer was only contractually obligated to support the dependent spouse
and their first child because those two were the only dependent alien individuals
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listed on the Affidavit of Support. Flores, 590 F. Supp. 3d at 1378 n.1.
¶ 41 Defendant cannot be liable for contractual damages to support individuals not
required to be listed, per federal immigration law, in the terms of the “contract.” See
Erler I, 824 F.3d at 1179 (explaining that a “sponsor would not reasonably expect to
have to support the immigrant and any others with whom she chooses to live,” nor
would “the U.S. Government, who is also a party to the contract created by the
affidavit, . . . reasonably expect the sponsor to support any others with whom the
immigrant might choose to live following [their] separation”).
¶ 42 Here, Father only promised to support Mother in the Affidavit of Support, as
she was the only alien intending to immigrate and enter the U.S. Their child was
born before Father signed the Affidavit of Support. Father initially and knowingly
omitted the child as an immigrant he intended to sponsor on the USCIS Form I-864,
as his son is a U.S. citizen, to whom the Affidavit of Support does not apply. The trial
court erred by calculating the damages Defendant owed to Plaintiff using the FPL
Guidelines for a two-person household. Flores, 590 F. Supp. 3d at 1378 n.1.
¶ 43 Whether Father owes Mother child support for their son is a separate issue
governed by state law. Mother is not barred from bringing her action for temporary
and permanent child support, as she had voluntarily dismissed those claims without
prejudice. Wenfang Liu, 686 F.3d at 419-20 (“The right of support conferred by federal
law exists apart from whatever rights Liu might or might not have under [state]
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divorce law.”) (emphasis supplied). The trial court’s order is affected by error on this
issue and is reversed.
b. Sponsored Immigrant’s Income
¶ 44 Father also argues the trial court erred by using Mother’s Adjusted Gross
Income when determining whether Father owed Mother damages arising from
breaching the Affidavit of Support. He asserts the trial court should have considered
Mother’s gross income, prior to deduction of certain depreciation expenses, instead of
the adjusted gross income listed on her federal tax returns.
¶ 45 Federal law does not define how to calculate a sponsored immigrant’s income.
Erler I, 824 F.3d at 1177 (“[A]lthough several provisions of the statutes and the
regulations contain instructions for calculating the sponsor’s income and household
size for purposes of determining whether the sponsor has the means to support the
intending immigrant, see 11 U.S.C. § 1183a(f)(6)(A)(iii); 8 C.F.R. § 213a.1 (defining
‘household income,’ ‘household size,’ and ‘income’); 8 C.F.R. § 213a.2(c)(2), there are
no similar provisions for calculating the sponsored immigrant’s income and
household size for purposes of determining whether the sponsor has breached his or
her duty to support the immigrant.”).
¶ 46 Other courts, which have addressed whether the inclusion or exclusion of
certain benefits, awards, grants, supplements, gifts, or agreements should be
considered as part of the sponsored immigrant’s “income,” provide guiding principles.
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One court held educational grants should be treated as income because they offset
the living expenses of a sponsored immigrant. Anderson, 840 F. App’x at 95 (“The [ ]
inclusion of “educational grants received by plaintiff” [as income] was not erroneous.
To the extent [immigrant]’s educational grant covered her tuition and did not require
repayment, it was income because it allowed her to put money she would otherwise
use for tuition to other uses.”).
¶ 47 Other courts have not considered public benefits for U. S. citizens, such as food
stamps, as income, reasoning: (1) “[f]ood stamps contribute to keeping an individual
above 125% of the [FPL] Guidelines, and the Affidavit’s stated goal is to keep people
from being public charges”; and, (2) the only reason the Internal Revenue Service
(IRS) fails to tax food stamps is because “it makes little sense for the government to
award a public benefit to an individual and then tax the individual on it.” Erler v.
Erler (Erler II), 2017 WL 5478560, *6 (N.D. Cal. Nov. 15, 2017), aff’d, 798 F. App’x
150 (9th Cir. 2020) (unpublished).
¶ 48 Apart from the treatment of food stamps and educational grants, most courts
have not considered other gifts, supplements, agreements, judgments, and benefits
as part of a sponsored immigrant’s income. For example, an informal agreement of
board for work between a mother and son, where the mother agreed to perform
certain housekeeping duties in exchange for living with her son, was not counted in
a sponsored immigrant’s income. Id. at *6 (“[Mother] never contracted with her son
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to provide domestic housework in exchange for rent coverage. The rent she is
allegedly responsible for covering is not income under 8 U.S.C. § 1183a.”) (citation
omitted). Without a formal contract or agreement, it is difficult to “appraise[ ] [an
immigrant’s] domestic work,” nor does such an agreement increase an immigrant’s
cash flow. Id. (citation omitted).
¶ 49 The court in Erler II also held a divorce judgment, which is owed to the
sponsoring spouse and never collected, does not constitute income for two reasons.
Id. at *5. First, a divorce judgment “relates to the division of the couple’s assets,” is
“not relevant,” and “does not qualify as income.” Id. (citation omitted). Second, if a
sponsoring spouse “desires to collect his [or her] [ ] judgment against [sponsored
immigrant], he [or she] can take this matter up with [the respective] Family Court.”
Id.
¶ 50 The U. S. Court of Appeals in Anderson explained the district court erred by
“defining income as ‘constructively-received income,’” and thus “permit[ing] the
inclusion of TRICARE benefits as part of [sponsored immigrant’s] income.” Anderson,
840 F. App’x at 95 (“The health insurance benefits [sponsored immigrant] received
through [sponsoring spouse’s] TRICARE coverage were not income because
[sponsoring spouse] did not pay an enrollment fee[,] and he should not receive a
windfall at [sponsored immigrant]’s expense.”) (citing Erler I, 824 F.3d at 1179).
Health insurance coverage extended via marriage is different than other means-
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tested benefits, such as food stamps, “because the state providing the benefits could
seek reimbursement from the sponsor.” Id. at 95 n.3.
¶ 51 The Alaska Supreme Court simplified the analysis by using the income
reported on a sponsored immigrant’s tax form in Villars v. Villars:
[A]n EITC, [Earned Income Tax Credit], is not income for
federal income tax purposes. The Internal Revenue Code
defines “taxable income” as “gross income minus
deductions.” See 26 U.S.C. § 63(a) (2018) Gross income is
defined as “all income from whatever source derived,” see
id. § 61(a), but the Code specifically excludes certain items
from the definition, see id. §§ 101–40 (“Items Specifically
Excluded from Gross Income”), including tax credits. See
Id. § 111. Therefore, an EITC, which is by definition a tax
credit, is not “income for purposes of the individual’s U.S.
Federal income tax liability” and cannot be used to offset
[supporting spouse]’s I–864 obligations. The superior court
did not err in concluding that any EITC [sponsored
immigrant] received was not income.
336 P.3d 701, 712-13 (Alaska 2014) (alterations omitted).
¶ 52 Here, Mother entered evidence demonstrating the costs and expenses she had
incurred to repair one of the properties she owned. Those costs were then deducted
from her gross income on her U.S. federal tax returns. The trial court did not err as
a matter of law by deducting these expenses when calculating Mother’s income. See
Id.; Erler II. at *5-6; Anderson, 840 F. App’x at 95.
V. Mother’s Loan to Father to Finance the Property in Suwanee, Georgia
¶ 53 Father asserts the trial court erred by finding a quasi-contract existed and
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awarding Mother equitable damages resulting from his failure to repay Mother for a
loan. Father argues the trial court should have found an implied-in-fact contract
existed and, as a result, fashioned a remedy stemming from a breach of contract.
¶ 54 If this Court were to hold the trial court properly found a quasi-contract
existed, Father argues the trial court abused its discretion in fashioning an equitable
remedy by failing to credit Father for his “sweat equity” in repairing some of Mother’s
other properties in Australia.
A. Quasi-Contract
¶ 55 An appellate court must have jurisdiction to consider an argument on appeal.
See Tohato, Inc. v. Pinewild Mgmt., 128 N.C. App. 386, 390, 496 S.E.2d 800, 803
(1998) (citation omitted) (explaining an appellate court may not reach a conclusion
on issues that were not raised at trial); State v. Sharpe, 344 N.C. 190, 194, 473 S.E.2d
3, 5 (1996) (explaining that “where a theory argued on appeal was not raised before
the trial court, the law does not permit parties to swap horses between courts in order
to get a better mount”) (citations and internal quotation marks omitted).
¶ 56 In Father’s response to Mother’s Second Amended Answer and Counterclaims
in August 2017, Father twice denied a loan existed. He first “explicitly denie[d]”
Mother’s assertion that “any note or other writing evidencing a loan from Mother to
Father” existed. Later, he asserted “Mother never explicitly requested that [he] repay
the money.”
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¶ 57 At trial in 2019, Father’s counsel stated in closing arguments: “[T]he problem
here is the [c]ourt is going to enter a judgment. And I think, analytically, these facts
as they have come out, I think it’s a quasi-contract.” On appeal, Father now asserts
the “evidence presented at trial[ ] tended to show the existence of a contract between
the parties for the loan of $110,000 AUD,” not a quasi-contract.
¶ 58 Father’s argument on appeal about whether a quasi-contract or implied-in-fact
contract existed is not properly preserved for this Court on appeal. Father cannot
“swap horses” on appeal, and his argument is waived. Tohato, 128 N.C. App. at 390,
496 S.E.2d at 803; Sharpe, 344 N.C. at 194, 473 S.E.2d at 5; accord Weil v. Herring,
207 N.C. 6, 10, 175 S.E. 836, 838 (1934) (“[T]he law does not permit parties to swap
horses between courts in order get a better mount[.]”).
B. Award of Equitable Damages
1. Standard of Review
¶ 59 This Court reviews unjust enrichment awards under an abuse of discretion
standard “[b]ecause the fashioning of equitable remedies is a discretionary matter for
the trial court.” Kinlaw v. Harris, 364 N.C. 528, 533, 702 S.E.2d 294, 297 (2010)
(citation omitted).
2. Unjust Enrichment
¶ 60 “Unjust enrichment is an equitable doctrine[,]” and “[t]rial courts have the
discretionary power to grant, deny, limit, or shape equitable relief as they deem just.”
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Bartlett Milling Co. v. Walnut Grove Auction & Realty, 192 N.C. App. 74, 80, 665
S.E.2d 478, 485 (2008) (citations and internal quotation marks omitted).
¶ 61 The equitable relief the trial court awarded to Mother related to the trial
court’s finding and conclusion that a quasi-contract existed to finance an income-
producing property located in Suwanee, Georgia, not any of Mother’s or Father’s other
properties located elsewhere. The trial court did not abuse its discretion by not
crediting Father with any purported “sweat equity” he put into repairing some of
Mother’s other properties located in Australia. Bartlett Milling Co., 192 N.C. App. at
80, 665 S.E.2d at 485. The trial court similarly declined to credit Mother with the
“sweat equity” she purportedly put into repairing their residential property in
Charlotte. Father’s argument is without merit.
C. Currency for Payment of Damages
¶ 62 Father also argues the trial court erred by awarding Mother repayment of the
loan in USD instead of AUD. Mother argues Father wishes to pay Mother back in
Australian funds on today’s exchange rate because the exchange rate is currently
lower than when Father originally converted the money to USD.
1. Standard of Review
¶ 63 “The determination of the proper money of the claim pursuant to G.S. 1C-1823
is a question of law.” N.C. Gen. Stat. § 1C-1825(d) (2021). This Court reviews
questions of law de novo. Martin, 194 N.C. App. at 719, 670 S.E.2d at 632 (citation
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omitted).
2. Foreign-Money Claims Act
¶ 64 The North Carolina Foreign-Money Claims Act provides “rules to fill gaps in
the agreement of the parties with rules as to the allocation of risks of fluctuations in
exchange rates.” N.C. Gen. Stat. § 1C-1823(b), cmt. 2 (2021). Those rules are as
follows:
(b) If the parties to a transaction have not otherwise
agreed, the proper money of the claim, as in each case may
be appropriate, is the money:
(1) Regularly used between the parties as a matter of
usage or course of dealing;
(2) Used at the time of a transaction in international
trade, by trade usage or common practice, for
valuing or settling transactions in the particular
commodity or service involved; or
(3) In which the loss was ultimately felt or will be
incurred by the party claimant.
Id. § 1C-1823(b) (emphasis supplied). The three rules in subpart b “will normally
apply in the order stated,” but the “[a]ppropriateness of a rule is to be determined by
the judge from the facts of the case.” Id. § 1C-1823(b) cmt. 2.
¶ 65 The evidence at trial indicated Father “[r]egularly used” AUD to pay Mother
for the interest accruing on her Australian line of credit. § 1C-1823(b)(1). Second,
AUD were “[u]sed at the time of the transaction.” § 1C-1823(b)(2). Finally, Mother’s
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loss was “ultimately felt” or “incurred” in AUD. N.C. Gen. Stat. § 1C-1823(b)(3)
(2021).
¶ 66 “If [ ] the contract fails to provide a decisive interpretation, the damage should
be calculated in the currency in which the loss was felt by the plaintiff or which most
truly expresses his loss.” M.V. Eleftherotria v. Owner of M.V. Despina R, [1979] App.
Cas. 685, 701 (internal quotation marks omitted) (cited favorably by N.C. Gen. Stat.
§ 1C-1823(b), cmt. 2).
¶ 67 Applying the rules in the “order stated,” all three prongs of § 1C-1823(b) dictate
Mother’s equitable relief should have been awarded and paid in AUD, not USD. The
trial court erred as a matter of law by awarding Mother equitable relief payable in
USD and its order on this issue is reversed in part. On remand, the trial court is to
correct and convert Mother’s equitable award and any interest thereon as re-payable
in AUD for any outstanding balance.
VI. Additional Hearing Before Entry of the Order
¶ 68 After the hearing in December 2019, Mother’s attorney initially drafted a
proposed order in this case. Father’s attorney revised Mother’s initial draft, and the
two subsequently exchanged various versions of the proposed judgment. Mother and
Father did not reach an agreement concerning the final version to present to the trial
court to sign, file, and enter. As a result, the trial court held an additional conference
on 9 February 2021. Father argues Mother “improperly reargued the merits of the
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case and submitted additional evidentiary information” at this conference.
¶ 69 Father asserts Mother’s proposed judgment, circulated after the conference,
“improperly altered the Order such that the substantive rights of the parties were
changed.” Father and Mother again submitted additional drafts and exchanged
several electronic communications regarding remaining issues before the court
entered a final order on 7 June 2021, over eighteen months after the hearing and oral
rendition in December 2019. Father argues Mother “improperly attempted and
succeeded at a back-door Rule 60 [of the North Carolina Rules of Civil Procedure]
argument.”
¶ 70 This over eighteen months delay in entry of the order following hearing and
rendition is unexplained in the order, and this delay also impeded the appeal and
appellate review of the trial judge’s holdings and conclusions. The mission of the
North Carolina Judicial Branch is “to protect and preserve the rights and liberties of
all the people, as guaranteed by the Constitution and laws of the United States and
North Carolina, by providing a fair, independent, and accessible forum for the just,
timely, and economical resolution of their disputes.” About North Carolina Courts,
North Carolina Judicial Branch, http://www.nccourts.gov/about/about-the-north-
carolina-judicial-branch (last visited Jan. 4, 2022) (emphasis supplied); see also
Cannon 3 of the North Carolina Code of Judicial Conduct (“A judge should perform
the duties of the judge’s office impartially and diligently. The judicial duties of a
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judge take precedence over all the judge’s other activities. The judge’s judicial duties
include all the duties of the judge’s office prescribed by law. In the performance of
these duties, the following standards apply. . . . (5) A judge should dispose promptly
of the business of the court.”) (emphasis supplied).
¶ 71 Father cites Buncombe County ex rel Andres v. Newburn, which explains “Rule
60(a) allows the correction of clerical errors, but it does not permit the correction of
serious or substantial errors.” 111 N.C. App. 822, 825, 433 S.E.2d 782, 784 (1993)
(citation omitted) (explaining the purpose of N.C. Gen. Stat. § 1A–1, Rule 60(a)
(2021)). Father also acknowledges: “The general rule is that it is in the discretion of
the trial judge whether to allow additional evidence by a party after that party has
rested or whether to allow additional evidence after the close of the evidence.” Gay
v. Walter, 58 N.C. App. 360, 363, 283 S.E.2d 797, 799 (1981) (citations omitted).
¶ 72 The additional conference held regarding the final form of the order to be
entered occurred before the trial judge had entered the final order. Rule 60(a) only
applies to changes made to a final order. Trial judges may exercise discretion about
whether to hold a conference after the close of the evidence and before the final order
is filed and entered. Id. While Father has failed to show the trial court violated N.C.
R. Civ. P. 60(a), the long year and one-half delay in entry and, consequently appellate
review, did not further nor promote “the just, timely, and economical resolution of
their disputes.”
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VII. Unavailability of Portions of the Trial Transcript
¶ 73 “The unavailability of a verbatim transcript does not automatically constitute
error. To prevail on such grounds, a party must demonstrate that the missing
recorded evidence resulted in prejudice.” State v. Quick, 179 N.C. App. 647, 651, 634
S.E.2d 915, 918 (2006) (citations omitted). “Overall, a record must have the evidence
necessary for an understanding of all errors assigned.” Madar v. Madar, 275 N.C.
App. 600, 608, 853 S.E.2d 916, 922 (2020) (quotation marks omitted) (quoting Quick,
179 N.C. App. at 651, 634 S.E.2d at 918).
¶ 74 Father does not show how the missing portions of the transcript prejudiced
him on appeal. Quick, 179 N.C. App. at 651, 634 S.E.2d at 918. Sufficient portions
of the transcript exist for this Court to understand the errors Father argued and
assigned to the trial court and the order eventually entered. The existing record
allowed Father to adequately present and argue this appeal. He has successfully
argued several issues and errors before this Court. Father has failed to show any
prejudice by the missing portions of the trial transcript.
VIII. Attorney’s Fees
¶ 75 “Remedies available to enforce an affidavit of support under this section
include . . . an order for specific performance and payment of legal fees and other costs
of collection[.]” 8 U.S.C. § 1183a(c). The USCIS Form I-864 Affidavit of Support,
which Father signed, also provides notice to sponsoring spouses: “If you are sued, and
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the court enters a judgment against you, the person or agency who sued you may use
any legally permitted procedures for enforcing or collecting the judgment. You may
also be required to pay the costs of collection, including attorney fees.”
¶ 76 While the trial court should have calculated Mother’s damages using a
household size of one, and is ordered to do so upon remand, Father still breached his
obligations to support Mother under the Affidavit of Support for 2016, 2017, and 2018.
Mother was a prevailing party on her claim, and she may recover reasonable
attorney’s fees. Iannuzzelli v. Lovett, 981 So.2d 557, 560-61 (Fla. Dist. Ct. App. 2008)
(“In order to recover attorney’s fees and costs under 8 U.S.C. § 1183a(c), the claimant
must obtain a judgment for actual damages based upon the opposing party’s liability
under the Affidavit.”). The trial court did not err by awarding Mother’s attorney’s
fees. In light of the errors Father successfully argued and prevailed in, regarding the
reduction of the amounts owed under the USCIS Form I-864 herein, the trial court
may in its discretion re-consider the amount previously awarded upon remand using
the elements and guidance stated in N.C. Rev. R. Prof. Conduct 1.5.
IX. Conclusion
¶ 77 The trial court possessed subject matter jurisdiction to hear Mother’s claims
for Father’s breach under the USCIS Form I-864 Affidavit of Support. The trial court
erred by calculating the damages Defendant owed to Plaintiff using the 125% of FPL
Guidelines for a two-person household. See Flores, 590 F. Supp. 3d at 1378 n.1. The
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amounts entered at trial on this issue are vacated. On remand, the trial court should
calculate Mother’s damages arising from the Affidavit of Support as follows:
125% FPL
Guidelines for a Mother’s Adjusted Mother’s Damages
Year
One-Person Gross Income (USD) (USD)
Household (USD)
$14,850 - $8,511 =
2016 $ 14,850 $ 8,511
$6,339
$15,075 - $7,173 =
2017 $ 15,075 $ 7,173
$7,902
$15,175 - $6,703 =
2018 $ 15,175 $ 6,703
$8,472
¶ 78 The trial court did not err as a matter of law by failing to add depreciation
expenses Mother lawfully deducted from her adjusted gross income on her federal tax
returns back into her “income” when calculating damages under the Affidavit of
Support. See Villars, 336 P.3d at 712-13; Erler II at *5-6; Anderson, 840 F. App’x at
95.
¶ 79 Father failed to preserve his argument about whether an express, quasi-
contract, or implied-in-fact contract for debt repayment existed on appeal, because he
offered contradictory arguments at trial. See Tohato, 128 N.C. App. at 390, 496
S.E.2d at 803; Sharpe, 344 N.C. at 194, 473 S.E.2d at 5; Weil, 207 N.C. at 10, 175 S.E.
at 838.
¶ 80 The trial court did not abuse its discretion when fashioning an equitable
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remedy by failing to credit Mother or Father with any purported “sweat equity” either
may have exerted into repairing other properties. The loan proceeds from Mother
were used to purchase the income-producing property located in Suwanee, Georgia,
which was sold by Father without repayment of Mother’s loan from the proceeds.
Bartlett Milling Co., 192 N.C. App. at 80, 665 S.E.2d at 485.
¶ 81 Mother loaned and paid Father in AUD, and Father re-paid the interest in
AUD. Mother’s loss occurred in AUD, and her re-payment and interest to her bank’s
line of credit is payable in AUD. Father received loan proceeds in AUD and took the
risk of conversion rate to USD after receipt.
¶ 82 The trial court erred as a matter of law by awarding mother equitable relief
payable in USD instead of AUD. See N.C. Gen. Stat. § 1C-1823(b); The Despina R,
[1979] App. Cas. 685, 701 (internal quotation marks omitted). On remand, the trial
court is to correct and convert Mother’s equitable award from the loan amount and
any interest due from USD into AUD, with credit for payments Father made.
¶ 83 Trial judges are granted discretion about whether to hold a conference after
the close of the evidence. Gay, 58 N.C. App. at 363, 283 S.E.2d at 799. The missing
portions of the transcript were not shown to have prejudiced Father, as Father
successfully argued several issues of error on appeal. Quick, 179 N.C. App. at 651,
634 S.E.2d at 918.
¶ 84 The trial court did not err by awarding Mother reasonable attorney’s fees
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arising from her claims for breach of the USCIS I-864 Form Affidavit of Support,
because Mother prevailed on her claim, subject to any adjustments noted above upon
remand. Iannuzzelli, 981 So.2d at 560-61. The order appealed from is affirmed in
part, reversed in part, and is remanded for further proceedings not inconsistent with
this opinion. It is so ordered.
AFFIRMED IN PART, REVERSED IN PART, AND REMANDED.
Judges CARPENTER and GRIFFIN concur.