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 sons born in 1996. Robert is cofounder and president of Stephens & Smith Construction Co., Inc., owning 34% of stock.
- Robert’s Stephens & Smith stock was valued at $298,459 at marriage and $5,044,934 at dissolution; other business and real estate interests (Infinity, R.I.P., partnerships) also appreciated.
- Janet suffered long-term mental illness during the last ~10 years of the marriage, received disability income, and was represented by a guardian ad litem; she did not participate in trial testimony.
- District court classified most interests in several entities as nonmarital (including Robert’s entire 34% in Stephens & Smith), awarded Janet a $1.1M "Grace award" payable in installments, and ordered alimony of $1,000/month for 120 months.
- Janet appealed challenging (1) classification of Stephens & Smith appreciation as nonmarital, (2) duration of spousal support under Neb. Rev. Stat. § 42-362, and (3) ordering transfers of partnership interests when organizational documents might restrict transfers.
Issues
| Issue | Plaintiff's Argument (Stephens) | Defendant's Argument (Robert) | Held |
|---|---|---|---|
| Whether appreciation of Robert’s Stephens & Smith stock during marriage is marital | Appreciation is marital when caused by owning spouse’s active efforts; district court erred excluding it | Appreciation of business value should be nonmarital unless nonowning spouse’s efforts caused growth; prior cases limited active-appreciation rule to retirement accounts | Court holds active-appreciation rule applies to all nonmarital assets; appreciation during marriage is presumed marital unless owning spouse proves growth was passive or not due to either spouse’s efforts; remanded to include increase in value of Robert’s 34% as marital and redivide; Grace award vacated |
| Whether spousal-support under § 42-362 must run while mental illness continues | Support should continue for duration of Janet’s mental illness | Trial court reasonably exercised discretion in fixing finite term (120 months) | Court affirms amount and duration (120 months) as not an abuse of discretion, but permits reconsideration in light of reclassification of assets |
| Whether court erred ordering transfers of partnership/business interests rather than cash | Transfers problematic because other partners may not consent; decree should allow cash alternative | Transfer of ownership interests (not cash) was equitable and within court’s discretion; court required Robert to complete documentation or parties may seek modification | Court affirms awarding ownership interests (not a cash award) and leaves remedy if transfers fail to modification proceedings |
| Validity of "Grace award" (equitable award when appreciation deemed nonmarital) | Grace award unjustified where appreciation was caused by Robert’s efforts | District court used Grace doctrine to achieve equity after excluding appreciation | Court rejects use of Grace award here because active-appreciation rule requires inclusion of appreciable marital growth; Grace award vacated |
Key Cases Cited
- Van Newkirk v. Van Newkirk, 212 Neb. 730 (1982) (discusses treatment of premarital gifts/inheritances and contributions to improvement or care)
- Rezac v. Rezac, 221 Neb. 516 (1985) (upheld treating premarital corporate stock appreciation as marital where husband’s efforts increased corporate value)
- Grace v. Grace, 221 Neb. 695 (1986) (approved equitable lump-sum awards when nonmarital assets produce marital needs—basis for so-called "Grace award")
- Meints v. Meints, 258 Neb. 1017 (2000) (adopted three-step dual-classification process for equitable property division)
- Heald v. Heald, 259 Neb. 604 (2000) (addresses marital property presumptions and classification principles)
- Coufal v. Coufal, 291 Neb. 378 (2015) (held appreciation of premarital retirement capital was nonmarital where not caused by either spouse’s efforts)
- Stanosheck v. Jeanette, 294 Neb. 138 (2016) (articulated test for when investment growth on nonmarital retirement assets remains nonmarital)
- Buche v. Buche, 228 Neb. 624 (1988) (cited on property division principles)