Labon v. Labon

2022 UT App 103

THE UTAH COURT OF APPEALS

LISA PETERSON LABON,
Appellee,
v.
PIOTR ARKADIUSZ LABON,
Appellant.

Opinion
No. 20200547-CA
Filed 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.

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

1. As is our custom, we refer to the parties by their given names
when they share a surname. And in conformity with the other
court documents in this case, we employ the anglicized form of
Piotr.
Labon v. Labon

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

2. “On appeal from a bench trial, we view the evidence in a light
most favorable to the trial court’s findings, and therefore recite the
facts consistent with that standard.” Chesley v. Chesley, 2017 UT
App 127, ¶ 2 n.2, 402 P.3d 65 (cleaned up).

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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

3. “Generally speaking, there are two categories of life insurance:
whole life insurance and term life insurance. Term life insurance
protects the policyholder for a specified period of time. Whole life
policies, by contrast, remain in existence throughout the life of an
insured. In general, premiums on term insurance policies pay
only for the cost of providing the insurance, while at least some
whole life policies have some type of participatory investment or
savings feature.” U.S. Bank Nat’l Ass’n v. PHL Variable Ins. Co.,
Nos. 12 Civ. 6811(CM)(JCF), 13 Civ. 1580(CM)(JCF), 2014 WL
2199428, at *1 (S.D.N.Y. May 23, 2014); see also Life insurance,
Black’s Law Dictionary (11th ed. 2019) (defining whole life
insurance as “[l]ife insurance that covers an insured for life,
during which the insured pays fixed premiums, accumulates
(continued…)

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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

savings from an invested portion of the premiums, and receives a
guaranteed benefit upon death, to be paid to a named beneficiary”
and stating “[s]uch a policy may provide that at a stated time,
premiums will end or benefits will increase”).

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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

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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.

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Labon v. Labon

¶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 $22,314
(resulting in an $18,344 monthly shortfall). 4 To equalize the
shortfall, the court determined that equity favored an alimony
award to Lisa of $1,646 per month.

Clarification Hearing

¶18 After the court issued its findings of fact and conclusions
of law, it held a “clarification hearing” to identify any
“typographical [errors], errors in computation, or any places

4. The court included taxes and adjustments for child support in
calculating the shortfalls.

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Labon v. Labon

where the parties felt that there needed to be further clarification
by the Court in order to properly articulate the decision.”

¶19 Peter argued that awarding the cash to Lisa and the
investments to him left him in a position that would force him to
sell both policies to maintain liquidity for his future investments.
Peter also noted that there would be “a substantial tax impact if
he” had to sell the policies. Peter was “concerned” that for him to
continue to invest, he would be subject to “a huge tax loss that
[was] not factored into his side of the equation.”

¶20 Lisa responded that Peter was going beyond the scope of
the hearing to mount an “informal appeal” by attacking the
findings of the trial court. She pointed out that Peter made clear
during his testimony that he wanted to continue “to invest in life
insurance” and “that’s what [the court] gave him.” She further
pointed out it was clear that while investing in life insurance
could produce “potentially taxable” events “depending on what
[Peter did] with” the insurance policies, “there was no testimony
with respect to any specifics” for the court to make any findings
on the tax implications of the division, especially given Peter’s
desire to keep the insurance assets.

¶21 Subsequently, in its final decree of divorce, the court stated
that it could not make any finding about the tax implications of
liquidating assets because no credible evidence had been
presented on the matter:

There was no credible evidence to permit the court
to make any findings as to the tax effect of
liquidating any specific asset or even that any
specific asset would be liquidated. To meet liquidity
needs during the marriage, the parties liquidated
some assets and also leveraged the assets they had.
It is unclear to the court whether Peter will need to
liquidate assets or leverage assets to satisfy his
liquidity needs.

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Labon v. Labon

¶22 Peter now appeals.

ISSUE AND STANDARD OF REVIEW

¶23 Peter contends that the trial “court erred when it divided
the estate, awarding Lisa all the parties’ cash plus alimony, and
Peter the parties’ investments, an equalizing payment [owed to
Lisa], and an alimony obligation, without considering liquidity,
risk, tax consequences, or other obligations.” “District courts have
considerable discretion concerning property distribution in a
divorce and we will uphold the decision of the district court
unless a clear and prejudicial abuse of discretion is
demonstrated.” Gerwe v. Gerwe, 2018 UT App 75, ¶ 8, 424 P.3d
1113 (cleaned up).

ANALYSIS

¶24 Peter now argues that the trial court’s division of assets
constitutes an abuse of discretion because it should have been
“obvious” to the court that a “consequence” of its ruling was that
Peter would be forced “to liquidate assets immediately to even pay
the equalization payment” to Lisa because the distribution left
him with negative cash and her with nearly $1,800,000 in cash.
Due to his alleged dearth of cash, Peter argues that the court’s
division left him “necessarily” having “to liquidate investments”
not only to pay the equalization but “to pay alimony and make up
his own spending deficit.” Thus, Peter argues that the court
should have anticipated “the immediate and foreseeable
consequences of a property distribution—consequences that
[would] fall like dominos as a direct result of the property
distribution itself.”

¶25 When rendering a decree of divorce, the court is expected
to include “equitable orders relating” to the division of “property,
debts,” and “obligations.” Utah Code Ann. § 30-3-5 (LexisNexis

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Labon v. Labon

Supp. 2021). In making this division, the “court should engage in
a four-step process”: (1) “distinguish between separate and
marital property,” (2) “consider whether there are exceptional
circumstances that overcome the general presumption that
marital property should be divided equally between the parties,”
(3) “assign values to each item of marital property,” and (4)
“distribute the property in a manner consistent with its findings
and with a view toward allowing each party to go forward with
his or her separate life.” Taft v. Taft, 2016 UT App 135, ¶ 33, 379
P.3d 890 (cleaned up).

¶26 And in making the equitable distribution, the court should
“generally” consider “the amount and kind of property to be
divided.” Burke v. Burke, 733 P.2d 133, 135 (Utah 1987). As
concerns the type of property, “[i]n situations where the marital
estate consists primarily of a single large asset, such as a business
or stock, a common acceptable approach for the court to take is to
award the asset to one party and make a cash award to the other
party.” Wadsworth v. Wadsworth, 2022 UT App 28, ¶ 79, 507 P.3d
385, petition for cert. filed, May 6, 2022 (No. 20220412). Doing so
avoids the obviously undesirable situation that forces former
spouses “to be in a close economic relationship which has every
potential for further contention, friction, and litigation, especially
when third parties having nothing to do with the divorce will also
necessarily be involved.” Argyle v. Argyle, 688 P.2d 468, 471 (Utah
1984) (cleaned up).

¶27 Moreover, a court should consider the “tax consequences”
associated with the division of marital property if one of the
parties “will be required to liquidate assets to pay marital debts.”
Morgan v. Morgan, 795 P.2d 684, 690 (Utah Ct. App. 1990). But the
court is under “no obligation to speculate about hypothetical
future tax consequences.” Id. (cleaned up). Thus, “[w]hen settling
property matters, the trial court may decline to consider the
speculative future effect of tax consequences associated with sale,
transfer, or disbursement of marital property.” Id. at 689. In other

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Labon v. Labon

words, “[t]here is no abuse of discretion if a court refuses to
speculate about hypothetical future tax consequences of a
property division made pursuant to a divorce.” Howell v. Howell,
806 P.2d 1209, 1213–14 (Utah Ct. App. 1991); see also Alexander v.
Alexander, 737 P.2d 221, 224 (Utah 1987) (stating that a “trial
court’s refusal to speculate about hypothetical future
consequences” of a taxable event associated with the division of
marital property is not, by default, “an abuse of discretion”).

¶28 “Application of the foregoing principles of law to the facts
of this case prompts the conclusion that the trial court did not
abuse its discretion” when it did not explicitly address the tax
consequences of the property division in which it awarded the
investments to Peter and the majority of the cash to Lisa. See Burke,
733 P.2d at 135.

¶29 First, Peter expressed a desire during trial to continue to
support himself in largely the same manner as he had been doing
during the marriage. It was reasonable for the court to find that
Peter would continue to support himself and meet liquidity needs
by leveraging the investment assets he was awarded. He had done
so in the past, and it was reasonable for the court to accept his
assertion that he would continue to do so in the future.

¶30 Second, the tax implications of the property division that
Peter raises were entirely speculative as presented to the trial
court. In short, nothing in the record indicates that Peter would
suffer adverse tax consequences as a result of the property
division. Indeed, just the opposite is true: the property division
was structured in such a way as to avoid tax consequences by
awarding Peter certain investment assets so that he could
continue to manage them profitably and would not have to
liquidate them.

¶31 Notably, the trial court did not order Peter to liquidate any
assets. Nor did Peter offer any evidence that he intended to or
would need to liquidate any assets, an action that would trigger a

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tax liability. Indeed, Peter spoke of liquidating the assets in
question only in hypothetical terms. He said, “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.” (Emphasis
added.) Nowhere did Peter present evidence to the court that he
would necessarily have to liquidate assets after the division of the
marital estate. Even at the clarification hearing, Peter spoke about
tax implications of liquidation in conditional terms. 5

¶32 “Tax consequences in this case were speculative as to
whether they could be avoided or delayed, and as to amount.” See
Howell, 806 P.2d at 1214. And while the “court heard testimony
and evidence regarding possible tax implications, [it] did not err
in refusing to adjust property distribution because of those
theoretical consequences.” See id.

¶33 In sum, the trial court did not abuse its discretion in
refusing to make adjustments related to potential tax
consequences resulting from the division of marital property
because those consequences were theoretical and speculative. 6

5. We note that Peter repeatedly refers in the record to unspecified
tax loss carryforwards from previous years that he had used to
offset tax liabilities in subsequent years. Thus, in addition to the
tax consequences being wholly speculative, the possible presence
of additional tax loss carryforwards further undermines the idea
that Peter would necessarily have to surrender the policies to meet
his obligations.

6. Peter also appears to challenge the court’s factfinding on the
existence of the loan from his mother. “But to successfully
challenge a trial court’s factual finding on appeal, the appellant
must overcome the healthy dose of deference owed to factual
findings by identifying and dealing with the supportive evidence
(continued…)

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Labon v. Labon

CONCLUSION

¶34 The trial court did not abuse its discretion in awarding the
investments to Peter and the cash to Lisa, because it was under no
obligation to speculate about the possible tax implications
associated with that division of property.

¶35 Affirmed.

and demonstrating the legal problem in that evidence, generally
through marshaling the evidence.” Taft v. Taft, 2016 UT App 135,
¶ 19, 379 P.3d 890 (cleaned up). Because Peter has failed to do so,
we decline to further consider this aspect of his argument.
Regarding the hedge fund investment, Peter also
complains that the trial court assigned Peter “all the risk” when it
should have distributed part of the risk to Lisa. Peter’s
characterization on appeal of the hedge fund as risky does not
comport with his testimony at trial, where he explicitly stated, “I
feel [it] will be profitable. . . . [It] is likely to be profitable.” Far
from assigning him all the risk, Peter’s own trial testimony
appears to have led the trial court to award him an asset that
would likely be profitable. Thus, we cannot say the trial court
abused its discretion in awarding the hedge fund solely to Peter.
See Gardner v. Gardner, 2019 UT 61, ¶ 18, 452 P.3d 1134 (stating that
an appellate court will find an abuse of discretion in an award of
property “only if no reasonable person would take the view
adopted by the trial court” (cleaned up)).

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