Stephens v. Stephens
297 Neb. 188
| Neb. | 2017Background
- Robert and Janet Stephens married in 1991; divorce filed in 2014 after ~25 years of marriage with twin children born in 1996.
- Robert co-founded and served as president of Stephens & Smith Construction Co., Inc., owning 34% stock; his premarital interest was valued at ~$298,459 in 1991 and ~$5,044,934 at dissolution.
- Janet worked as a real estate agent earlier in the marriage but became unable to work during the last ~10 years due to mental illness; a guardian ad litem/guardian and conservator represented her and she receives disability income.
- The trial court classified most of Robert’s interests in various business entities as nonmarital, found Stephens & Smith entirely nonmarital, but awarded Janet a $1.1 million "Grace award" payable in installments.
- The court awarded Janet $1,000/month alimony for 120 months under Neb. Rev. Stat. § 42-362 and ordered certain transfers of partnership interests instead of cash; Janet appealed challenging (1) classification of Stephens & Smith appreciation, (2) alimony duration, and (3) ordering transfers when organizational documents might not permit them.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether appreciation in value of Robert’s 34% Stephens & Smith stock during marriage is marital property | Janet: appreciation is marital because it was caused by Robert’s active efforts and thus subject to equitable division | Robert: appreciation is nonmarital (premarital) and, if any marital award, only via limited Grace-type award; business appreciation should count only if caused by non-owning spouse | Court: reversed — appreciation during marriage is marital to the extent caused by active efforts of either spouse; here Robert’s active role required district court to include the increase in value of his 34% interest as marital and to reallocate equitably (Grace award vacated) |
| Proper standard for classifying appreciation of nonmarital assets | Janet: adopt active-appreciation rule treating appreciation caused by efforts of either spouse as marital | Robert: urged a rule limiting marital characterization to appreciation caused by non-owning spouse or passive market forces | Court: adopts/affirms active-appreciation rule (no distinction between owning and nonowning spouse); growth is presumed marital unless owning spouse proves growth traceable to nonmarital portion and not due to active efforts |
| Duration of spousal support under § 42-362 for mental illness | Janet: support should continue so long as her mental illness persists | Robert: supported fixed 120-month award | Court: affirmed 120-month award — court did not abuse discretion; § 42-362 permits orders revisable and does not mandate support continue for entire illness duration |
| Ordering transfers of partnership/ business interests rather than cash when organizational documents may restrict transfers | Janet: transfer may be impractical if other partners refuse consent; court should have ordered cash | Robert: transfer was feasible and preferable to avoid tax consequences and disruption | Court: affirmed court’s decision to order transfers; if transfer cannot be completed, parties may seek modification |
Key Cases Cited
- Meints v. Meints, 258 Neb. 1017 (establishing three-step dual classification process for marital property)
- Stanosheck v. Jeanette, 294 Neb. 138 (adopting test for treating investment growth on nonmarital retirement accounts as nonmarital only if growth is traceable and not due to spouses' efforts)
- Coufal v. Coufal, 291 Neb. 378 (applying active-appreciation analysis to appreciation in premarital retirement assets)
- Rezac v. Rezac, 221 Neb. 516 (holding appreciation of premarital corporate stock attributable to husband’s reinvestment/efforts may be marital)
- Grace v. Grace, 221 Neb. 695 (recognizing discretionary lump‑sum awards to achieve equity where classification rules produce harsh results)
- Van Newkirk v. Van Newkirk, 212 Neb. 730 (earlier statement limiting treatment of inherited/premarital property absent contributions or care by spouse)