Labon v. Labon

• Citation: 2022 UT App 103
• Decision Date: 18 August 2022
• Docket Number: 20200547-CA
• Parties: Lisa Peterson Labon, Appellee, v. Piotr Arkadiusz Labon, Appellant.
• Court: Court of Appeals of Utah

2022 UT App 103

Lisa Peterson Labon, Appellee, v. Piotr Arkadiusz Labon, Appellant.

No. 20200547-CA

Court of Appeals of Utah

August 18, 2022

Third District Court, Silver Summit Department The Honorable Kent R. Holmberg No. 174500142

Julie J. Nelson, Alexandra Mareschal, and Jaclyn Jane Robertson Attorneys for Appellant

Karra J. Porter and Kristen C. Kiburtz, Attorneys for Appellee

Judge David N. Mortensen authored this Opinion, in which Judges Michele M. Christiansen Forster and Jill M. Pohlman concurred.

OPINION

MORTENSEN, Judge:

¶1 During Peter^[1] and Lisa Labon's marriage, Peter generated a significant income managing the marital assets. Over the years, the ebb and flow of income was tempered by occasionally leveraging-basically borrowing from-two whole life insurance policies. At trial in the divorce action Peter maintained that he intended to generate income in the same way after the divorce as he had historically done during the marriage. When the trial court divided the marital assets, and particularly the insurance policies, so that Peter could continue to do so, Peter objected and now appeals, claiming that the way the court divided the assets is not equitable and will cause him to suffer substantial negative tax consequences. On review, we conclude that the trial court did not exceed its discretion and therefore affirm.

BACKGROUND^[2]

¶2 Peter and Lisa married in 1995. In the early 2000s, Peter made a lot of money, primarily through investing and the financial industry. Around 2008, he stopped working a traditional job and devoted himself to investing and managing the marital assets, thereby generating the household's income. Lisa was a "full-time stay-at-home wife and mother" throughout the marriage.

¶3 Around 2017, Peter and Lisa experienced irreconcilable differences, and after a twenty-five-year union, they divorced in 2020.

Division of Property

¶4 As relevant here, the division of marital assets consisted largely of Peter receiving various financial instruments and Lisa receiving cash.

¶5 Real Property: After filing for divorce in the trial court, the parties entered into a stipulation, which the court accepted, for the division of a house in Park City, Utah. The proceeds of the sale of the Park City house were split equally, with each party receiving $3,077,000 in cash. Peter used $1,560,000 and Lisa used $1,300,344 to buy individual houses in Park City-properties which the trial court awarded to each as separate property. The parties funded several bank or investment accounts with their "respective remaining proceeds" from the sale of the Park City house. And Lisa used some of her money to establish a business. These assets the court likewise awarded as separate property.

¶6 Cash: The parties had $1,643,277 in cash, the bulk of which came from selling a house in Oregon. The court awarded $61,517 to Peter and $1,581,760 to Lisa.

¶7 Other Property: The court awarded Peter the parties' $25,000 horse. The parties had already divided a valuable wine collection, numerous vehicles (six going to Peter and two going to Lisa), and other personal property, which the court awarded to the parties as presently held.

¶8 Life Insurance Investments: The parties held two whole life insurance policies, which the court awarded to Peter.^[3] One policy (Northwestern Mutual) had a cash value of $1,761,224 but was encumbered by a debt of $1,391,687. The other policy (Pacific) had a cash value of $592,931 and was unencumbered.

¶9 During the divorce proceedings, Peter explained how they used the policies to take out loans: "[W]e borrowed money multiple times during our marriage to make other investments. . . . [W]e borrowed money essentially from ourselves because the life insurance policy was ours." And even though they paid interest on the loans from their policies, they "received dividends to counteract that," making the effective interest rate "on these loans . . . 1 percent or less." Even during the divorce proceedings, Peter had paid off a loan against the Pacific life insurance policy. Peter also explained that this leveraging did not incur taxes because the policies were not surrendered. But he pointed out that "if as . . . a result of these proceedings, the decision is made to surrender those policies to get the cash value, there will be a tax liability associated with them."

¶10 When asked how he planned to support himself financially going forward, Peter answered, "Well, . . . essentially the same way as I have in the past. . . . I plan to make similar kinds of investments going forward." He further explained that he was "planning to diversify into other" investment products.

¶11 The court awarded the parties' whole life insurance investments to Peter:

Given Peter's unilateral decision to pay off the [life insurance] loan, combined with his testimony that he wants to continue to invest in life insurance, the Court awards the Pacific Life Insurance policy to Peter.

. . . .

Although the Court finds that [the Northwestern Mutual life insurance policy] and the corresponding loans are both marital, the Court awards the asset to Peter in the equitable division of the parties' marital estate. The Court finds that Lisa did not understand and/or was not given a choice as to whether or not the loans were taken. It is more equitable, therefore, to award the value of the asset and the debt to Peter with an offset to Lisa from another asset.

¶12 Business Ownership: The court also awarded the couple's business ownership (worth $741,000) in a hedge fund-which was run by Peter's friend-to Peter. Peter challenged the value of this interest, alleging that a $500,000 loan from his mother enabled him to make the investment in this hedge fund and that this alleged debt was also marital. For context, Peter testified that an earlier incarnation of the hedge fund had produced a 65% return for him in less than two years. And Peter testified that his mother had been earning only 1% on her $500,000 in the way she had it invested, but he offered to invest it for her and give her a 4% return because he would be earning an even greater return on the money invested in the hedge fund. Alternatively, Peter argued that even "if the court [did] not accept his contention that there [was] a $500,000 loan," the hedge fund "investment was purchased with this $500,000 from his mother" and thus "should not be considered marital property."

¶13 In contrast, Lisa testified that "she was led to believe, by Peter, that he was investing his mother's money directly into [the hedge fund]-not that they would be borrowing from Peter's mother and investing directly themselves." Rather, she explained that it was her understanding that Peter "was adding his mother to [the hedge fund] as a separate investment." Lisa maintained that the only discussion was that Peter was "going to get his mother in on the investment," not a discussion that "he was going to take his mother's money, put it in that investment, and try to profit off of his mother's capital." Accordingly, Lisa's testimony was that the investment in the hedge fund was their own, not anyone else's.

¶14 The court found that Lisa's testimony was "more credible than [Peter's] on this issue." The court observed that there was "no promissory note or other evidence of this loan," that "[n]o documentary evidence of this transaction was presented at trial," and that "only . . . Peter's testimony" supported the transaction. It also noted that Peter's mother had not testified about the loan. Thus, the court rejected Peter's arguments because (1) "Peter did not present evidence to substantiate this claim other than his own testimony," (2) the investment was titled in Peter's name, (3) Peter had not established that the "asset [was] actually in Peter's mother's name," and (4) "Peter did not present evidence tracing the receipt of any money from his mother and the investment of the same sum into" the hedge fund. The court observed,

Without some documentary evidence to support this series of transactions, and given the amount of the sum in question, the court does not find this argument persuasive. The credible evidence presented at trial supports the court's findings that the [hedge fund] investment is a marital asset and the alleged loan from Peter's mother has not been established nor traced to the [hedge fund] investment.

In short, the court concluded that Peter had "not met his burden of proof to establish that there [was] a marital debt of $500,000" owed to his mother.

¶15 Equalizing Payment: After the court divided the marital assets and accounted for offsets, it ordered Peter to pay Lisa an equalizing payment of $192,899.

Income and Alimony

¶16 Income: The court determined that Peter could earn $250,000 per year or $20,833 per month. It based this determination on his "historical earnings and his income representations" on his investments. Specifically, the court noted that "although the corpus available for him to manage [would] be reduced, this figure [was] still within his stated 4-10% range [of return on his investment assets] and equates to his investment income over 9 years." The court found that insofar as working was concerned, the "highest and best use of Peter's time [was] to continue his work in investing and Peter credibly testified that this was his intention. Based on [Peter's vocational expert's] analysis, Peter [was] earning at least double what he could by going to work for someone else in the financial services industry." The court found Lisa's earning capacity to be $3,743 per month.

¶17 Alimony: To maintain the marital standard of living, the court found that Peter's expenses were $29,515 (resulting in a $15,053 monthly shortfall) and Lisa's expenses were...