Stephens v. Stephens
297 Neb. 188
| Neb. | 2017Background
- Robert and Janet Stephens married in 1991; divorced in 2014 after a 25-year marriage with twin sons. Robert co-founded and was president of Stephens & Smith Construction Co., Inc., owning 34% of stock; value rose from ~$298,459 at marriage to ~$5,044,934 at dissolution.
- Janet worked as a real estate agent early in the marriage but suffered mental illness during the last ~10 years, leaving her largely unable to work; a guardian ad litem/guardian and conservator represented her at trial.
- Trial evidence consisted mainly of Robert’s testimony and 166 exhibits; Robert conceded some business interests and retirement plans were marital but argued most business-appreciation was nonmarital.
- The district court classified several entities as nonmarital (including Stephens & Smith and its subsidiary R.I.P.), awarded Janet certain jointly owned property interests and a $1.1 million "Grace award" payable over time, and ordered $1,000/month spousal support for 120 months under Neb. Rev. Stat. § 42-362.
- Janet appealed the classification of Stephens & Smith appreciation as nonmarital, the duration of spousal support, and the court’s order transferring partnership interests when entity governing documents might preclude transfer.
Issues
| Issue | Plaintiff's Argument (Janet) | Defendant's Argument (Robert) | Held |
|---|---|---|---|
| Whether appreciation of Robert’s Stephens & Smith stock during marriage is marital | Appreciation should be marital because Robert’s active efforts caused growth | Appreciation is nonmarital; only appreciation caused by nonowning spouse should be marital (or passive market forces) | Court reverses: appreciation during marriage is marital to the extent caused by either spouse’s active efforts; remands to include the increase in value of Robert’s 34% interest and to equitably divide it (Grace award vacated) |
| Standard/burden for classifying appreciation as nonmarital | Not directly asserted by Janet (she challenges exclusion) | Owning spouse must show appreciation is passive or attributable to others | Held: owning spouse bears burden to prove growth is traceable and not due to active efforts; active appreciation rule applies equally to business interests and retirement accounts |
| Proper use of Grace award when nonmarital asset excluded from marital estate | Grace award insufficient — full inclusion required if appreciation attributable to active efforts | District court used Grace award to achieve equity when excluding asset | Held: Grace awards no longer substitute for classifying active-appreciation as marital; here vacated because appreciation must be included and equitably divided |
| Duration of spousal support under § 42-362 for mentally ill spouse | Support should continue as long as Janet’s mental illness continues | District court’s 120-month award was within discretion | Held: affirmed award amount and duration as not an abuse of discretion but district court may revisit alimony amount on remand given reclassification of asset |
| Transfer of partnership interests where governing documents may restrict transfer | Transfer may be impractical if other partners won’t consent; cash award preferred | Court ordered transfer to create co-ownership; Robert to effect transfers or parties may seek modification | Held: affirmed district court’s exercise of discretion to award ownership interests rather than cash; modification available if transfer cannot occur |
Key Cases Cited
- Van Newkirk v. Van Newkirk, 212 Neb. 730 (discussing treatment of premarital business and when appreciation may remain separate)
- Rezac v. Rezac, 221 Neb. 516 (recognizing appreciation of premarital corporate stock may be marital when caused by ownership efforts)
- Grace v. Grace, 221 Neb. 695 (illustrating equitable "Grace award" where nonmarital asset facts created fairness concerns)
- Meints v. Meints, 258 Neb. 1017 (adopting three-step dual classification process for marital vs nonmarital property)
- Stanosheck v. Jeanette, 294 Neb. 138 (setting test for when investment growth on nonmarital portion of retirement account may remain nonmarital)
- Coufal v. Coufal, 291 Neb. 378 (applying active appreciation analysis to retirement account growth)
- Heald v. Heald, 259 Neb. 604 (general principles on property classification and marital assets)
- Black v. Black, 223 Neb. 203 (explaining § 42-362 support for mentally ill spouse should continue only so long as illness continues)