Stephens v. Stephens
297 Neb. 188
Neb.2017Background
- Robert and Janet Stephens married in 1991; two children; dissolution filed in 2014. Janet suffered long‑term mental illness and received SSDI; a guardian ad litem/guardian was appointed for her.
- Robert co‑founded and was president of Stephens & Smith Construction Co., Inc., owning 34% of stock; his premarital interest was valued at ~$298,459 (1991) and at ~$5,044,934 at dissolution.
- Robert worked full time as president throughout the 25‑year marriage, participated in board/management decisions, and personally guaranteed major loans; company growth included both operating profits and real‑estate subsidiaries (R.I.P. and others).
- The district court treated most listed business interests as nonmarital (including Robert’s 34% in Stephens & Smith and R.I.P.), excluded ~ $5M appreciation from the marital estate, and instead awarded Janet a discretionary "Grace" cash award of $1.1M payable over time.
- The court awarded alimony under Neb. Rev. Stat. § 42‑362 ($1,000/month for 120 months) and divided other assets; Janet appealed arguing misclassification of Stephens & Smith appreciation, duration of spousal support, and practical problems transferring business interests.
Issues
| Issue | Plaintiff's Argument (Janet) | Defendant's Argument (Robert) | Held |
|---|---|---|---|
| Whether appreciation in Robert’s Stephens & Smith stock during marriage is marital property | Appreciation due to Robert’s active efforts should be treated as marital (Janet contends growth is marital and subject to division) | Only appreciation caused by nonowning spouse should be marital; here Janet did not contribute, so appreciation is nonmarital | Court holds active‑appreciation rule applies to any nonmarital asset: appreciation caused by either spouse’s efforts is marital; reverses exclusion and vacates Grace award; remands to include appreciation in marital estate |
| Who bears burden to prove appreciation is nonmarital | (Janet) Burden on Robert to show appreciation was passive/nonmarital | Robert argued growth was passive/organic and not attributable to him | Court confirms burden is on owning spouse to prove nonmarital nature of growth and finds Robert failed to carry it for full appreciation amount |
| Proper remedy when premarital business appreciation is excluded | (Janet) Court should include appreciation or, if excluded, make equitable award | (Robert) Court appropriately excluded appreciation and made a Grace award as equitable adjustment | Court disapproves Grace approach where appreciation is marital under active‑appreciation rule; vacates Grace award and remands for equitable division of the now‑marital asset |
| Duration of spousal support under § 42‑362 for mentally ill spouse | (Janet) Support should continue as long as mental illness persists | (Robert) Court’s 120‑month award was discretionary and sufficient | Court affirms award amount/duration as within trial court discretion but notes court may reconsider alimony in light of reclassification of asset on remand |
Key Cases Cited
- Stanosheck v. Jeanette, 294 Neb. 138 (2016) (adopted test for treating investment earnings on nonmarital retirement accounts as nonmarital only if growth is traceable and not due to either spouse’s efforts)
- Meints v. Meints, 258 Neb. 1017 (2000) (articulated three‑step dual classification process for equitable property division)
- Van Newkirk v. Van Newkirk, 212 Neb. 730 (1982) (earlier precedent on treatment of inherited/premarital property and equities; discussed in relation to Grace awards)
- Rezac v. Rezac, 221 Neb. 516 (1985) (held appreciation of premarital corporate stock could be marital where appreciation resulted from ownership/active reinvestment during marriage)