Stephens v. Stephens
297 Neb. 188
| Neb. | 2017Background
- Robert and Janet Stephens married in 1991; two children; Robert co‑founded and was president (34% owner) of Stephens & Smith, a construction C‑corporation; Janet suffered a disabling mental illness in the last decade of the marriage and did not participate in the trial (represented by GAL).
- At marriage, Robert’s Stephens & Smith stock was valued at about $298,459; at dissolution it was valued at about $5,044,934 — ~ $5 million appreciation during the 25‑year marriage.
- The district court found Robert’s interests in several entities (Infinity, Heritage, Smith & Stephens Real Estate, Aardvark Partners) traceable to premarital assets and their appreciation nonmarital; it also treated Stephens & Smith (including R.I.P.) as entirely nonmarital and awarded Janet a $1.1 million “Grace award.”
- The court treated Aardvark Antique Mall, The Mystic Pines Apartments, and Eagles Landing Apartments as marital and ordered transfers to create equal ownership; it awarded Janet $1,000/month alimony 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 decree’s transfers of partnership interests may be infeasible under organizational documents.
Issues
| Issue | Plaintiff's Argument (Janet) | Defendant's Argument (Robert) | Held |
|---|---|---|---|
| Classification of appreciation in Stephens & Smith | Appreciation during marriage is marital because it was caused by Robert’s active efforts (and active appreciation doctrine should include owning‑spouse efforts) | Appreciation is nonmarital because the growth was passive/organic and not caused by Janet; business growth should be excluded absent nonowning spouse contribution | Court: Reverse; appreciation during marriage is marital to the extent caused by either spouse’s active efforts; directed district court to include the increase in value of Robert’s 34% interest as marital and redivide (vacating the Grace award). |
| Burden to prove nonmarital growth | N/A | Owning spouse must prove appreciation was passive or due to third parties/market forces | Court: Burden is on the owning spouse to prove extent appreciation was nonmarital; Robert failed to show passive-only growth. |
| Validity of Grace award (equitable lump sum despite nonmarital finding) | Grace award insufficiently justified when appreciation is marital | Sought to limit Janet to Grace award because court found asset nonmarital | Court: Vacated Grace award as inseparable from incorrect nonmarital classification. |
| Duration of support under § 42‑362 | Support should continue while Janet’s mental illness continues | Court awarded 120 months; Robert did not cross‑appeal | Court: Affirmed award (120 months); discretion of trial court not abused though court may reconsider alimony after redividing marital estate. |
| Ordering transfer of partnership interests despite organizational limits | Transfer may be infeasible if partners refuse consent | District court ordered transfer and gave remedy (modification) if transfer fails | Court: Affirmed district court’s choice to award ownership interests rather than immediate cash; parties may seek modification if transfer cannot occur. |
Key Cases Cited
- Van Newkirk v. Van Newkirk, 212 Neb. 730, 325 N.W.2d 832 (Neb. 1982) (earlier authority on when premarital property appreciation may be excluded from marital estate)
- Grace v. Grace, 221 Neb. 695, 380 N.W.2d 280 (Neb. 1986) (permitting equitable "Grace" awards when strict classification produces inequity)
- Rezac v. Rezac, 221 Neb. 516, 378 N.W.2d 196 (Neb. 1985) (treating appreciation of premarital corporate stock as marital where increase resulted from reinvestment/operations)
- Meints v. Meints, 258 Neb. 1017, 608 N.W.2d 564 (Neb. 2000) (adopting three‑step dual classification process for equitable property division)
- Stanosheck v. Jeanette, 294 Neb. 138, 881 N.W.2d 599 (Neb. 2016) (holding investment earnings on nonmarital retirement accounts may be nonmarital when readily traceable and not due to either spouse’s efforts)
- Coufal v. Coufal, 291 Neb. 378, 866 N.W.2d 74 (Neb. 2015) (applying active appreciation analysis to premarital retirement account growth)