Stephens v. Stephens
297 Neb. 188
| Neb. | 2017Background
- Robert and Janet Stephens married in 1991; two children; divorce filed in 2014. Robert was cofounder and president of Stephens & Smith Construction Co., Inc., owning 34% of the stock; value rose from ~$298,459 at marriage to ~$5,044,934 at dissolution.
- Janet intermittently worked earlier in the marriage but suffered a mental illness in the last 10 years, receiving disability income; a guardian ad litem/guardian was appointed and she did not participate in trial.
- District court classified many of Robert’s business interests (Infinity, Heritage, Smith & Stephens RE, Aardvark Partners, and Stephens & Smith including subsidiary R.I.P.) as nonmarital, concluding appreciation was passive or premarital.
- District court nonetheless awarded Janet a “Grace award” of $1.1 million (installments) and ordered division/transfer of certain jointly valued real property interests to the parties; awarded Janet $1,000/month alimony for 120 months under Neb. Rev. Stat. § 42-362.
- Janet appealed, challenging (1) classification of Stephens & Smith appreciation as nonmarital, (2) duration of spousal support under § 42-362, and (3) ordering transfers of partnership interests where other partners’ consent may be required.
Issues
| Issue | Plaintiff's Argument (Janet) | Defendant's Argument (Robert) | Held |
|---|---|---|---|
| Whether appreciation of Robert’s Stephens & Smith stock during marriage is marital | Appreciation resulted from marital efforts (Robert’s work) and thus should be marital property | Appreciation is nonmarital; only growth due to nonowning spouse should be marital for business interests | Court holds appreciation presumptively marital under active-appreciation rule; reverses exclusion of Stephens & Smith growth and vacates Grace award; remands for division |
| Burden of proof to show appreciation is nonmarital | N/A (argued that appreciation was marital) | Owning spouse must show appreciation was passive/nonmarital | Court confirms burden rests on owning spouse to prove nonmarital nature and extent of passive growth |
| Proper application of the active-appreciation rule to business interests | Active appreciation includes efforts of owning spouse; thus inclusion in marital estate required | Court should require nonowning spouse’s effort for business appreciation to be marital (defendant’s preferred rule) | Court adopts active-appreciation rule applying equally to appreciation caused by efforts of either spouse; no special retirement-account limitation |
| Duration of support under Neb. Rev. Stat. § 42-362 | Support should continue so long as Janet remains mentally ill | 120 months is appropriate and within discretion | Court affirms award amount and duration (120 months) as not an abuse of discretion but notes court may reconsider alimony given revised property division |
| Ordering transfer of partnership/business ownership interests (consent issues) | Transfer may be impractical if other partners do not consent; court should order cash instead | Transfer is acceptable; court trusted Robert to obtain necessary cooperation | Court affirms ordering ownership transfers rather than cash; parties may seek modification if transfers cannot be effectuated |
Key Cases Cited
- Van Newkirk v. Van Newkirk, 212 Neb. 730 (1982) (older precedent excluding certain premarital business appreciation absent contributions)
- Grace v. Grace, 221 Neb. 695 (1986) (recognized equitable "Grace award" where nonmarital business value influenced overall fairness)
- Rezac v. Rezac, 221 Neb. 516 (1985) (held appreciation of premarital stock could be marital where owning spouse’s efforts caused growth)
- Meints v. Meints, 258 Neb. 1017 (2000) (adopted three-step dual classification process for marital vs nonmarital property)
- Stanosheck v. Jeanette, 294 Neb. 138 (2016) (articulated test for classifying investment growth in retirement accounts as nonmarital)
- Coufal v. Coufal, 291 Neb. 378 (2015) (applied active-appreciation analysis to increase in premarital retirement capital)