Stephens v. Stephens
297 Neb. 188
Neb.2017Background
- Robert and Janet Stephens married in 1991; Robert co‑founded and was president of Stephens & Smith Construction Co., Inc., owning 34% of stock; stock value rose from about $298,459 (1991) to $5,044,934 at dissolution.
- Janet suffered a long‑term mental illness during the last ~10 years of the marriage, receiving disability income and represented by a guardian ad litem who also served as guardian/conservator; she did not participate in trial.
- Robert was actively involved in Stephens & Smith throughout the marriage (full‑time president, board member, set his salary/bonuses, personally guaranteed loans, involved in leadership selection); company had ~200 employees and several subsidiaries/partnership interests (including R.I.P., Infinity, Heritage, Aardvark Partners).
- District court treated many of Robert’s nonmarital business interests as separate, found the entire appreciation of Stephens & Smith nonmarital, but awarded Janet a $1.1 million "Grace award" payable in installments; the court awarded Janet $1,000/month spousal support for 120 months under Neb. Rev. Stat. § 42‑362.
- Janet appealed, arguing (1) the appreciation of Stephens & Smith should be marital, (2) spousal support should continue while her mental illness persists, and (3) the court erred by ordering transfers of partnership interests where articles may restrict transfers.
Issues
| Issue | Plaintiff's Argument (Janet) | Defendant's Argument (Robert) | Held |
|---|---|---|---|
| Classification of Stephens & Smith appreciation | Appreciation during marriage is marital because it was caused by marital efforts (Robert's active role) | Appreciation is nonmarital; only appreciation caused by nonowning spouse should be marital for businesses | Court holds appreciation during marriage is marital to the extent caused by efforts of either spouse; reverses exclusion and vacates Grace award; remands for equitable division including appreciation |
| Proper application of active appreciation rule | Growth attributable to Robert's active management should be treated as marital | Robert argued active appreciation rule should require nonowning spouse's contribution for business interests | Court adopts active appreciation rule applying to any nonmarital asset: appreciation is marital if due to active efforts of either spouse or first‑tier management; places burden on owning spouse to prove otherwise |
| Duration of spousal support under § 42‑362 | Support should continue while Janet remains mentally ill | Award of 120 months is within court's discretion | Affirmed: award of $1,000/month for 120 months not an abuse of discretion; court may reconsider in light of reclassification and remand |
| Transfer of partnership/business interests vs. cash award | Concern transfer requires partner consent and may not occur | Court ordered transfer; if transfer fails parties may seek modification | Affirmed: court did not abuse discretion in awarding ownership interests rather than cash; modification available if transfer cannot be completed |
Key Cases Cited
- Van Newkirk v. Van Newkirk, 212 Neb. 730, 325 N.W.2d 832 (recognition of limits on treating inherited/premarital property as marital absent contributions)
- Rezac v. Rezac, 221 Neb. 516, 378 N.W.2d 196 (holding appreciation of premarital corporate stock could be marital when caused by reinvestment/owner efforts)
- Grace v. Grace, 221 Neb. 695, 380 N.W.2d 280 (approved equitable “Grace award” to achieve fairness where classification left spouse with little despite nonmarital asset)
- Meints v. Meints, 258 Neb. 1017, 608 N.W.2d 564 (adoption of the three‑step dual classification/value/division framework under § 42‑365)
- Stanosheck v. Jeanette, 294 Neb. 138, 881 N.W.2d 599 (test for when investment growth on nonmarital retirement accounts may remain nonmarital)
- Coufal v. Coufal, 291 Neb. 378, 866 N.W.2d 74 (appreciation of premarital retirement capital may be nonmarital when not caused by either spouse’s efforts)
- Heald v. Heald, 259 Neb. 604, 611 N.W.2d 598 (principles on marital property and income during marriage)
- Black v. Black, 223 Neb. 203, 388 N.W.2d 815 (interpretation of § 42‑362; support for mentally ill spouse should continue only so long as illness continues)