Stephens v. Stephens
297 Neb. 188
| Neb. | 2017Background
- Robert and Janet Stephens were married in 1991; they divorced in 2014 after a 25‑year marriage with twin children. Robert co‑founded and served as president of Stephens & Smith Construction Co., Inc., owning 34% of its stock; his interest appreciated from about $298,459 at marriage to about $5,044,934 at dissolution.
- Janet suffered a mental illness during the last ~10 years of the marriage, became periodically hospitalized, could not work, and receives Social Security disability; a guardian ad litem (and conservator/guardian) represented her at trial.
- At trial Robert was the sole witness; the district court found many of Robert’s business interests (Infinity, Heritage, Smith & Stephens Real Estate, Aardvark Partners, and Stephens & Smith including subsidiary R.I.P.) nonmarital and excluded the appreciation during marriage from the marital estate.
- The district court nevertheless classified several real‑estate investments as marital and ordered transfers of half the interests to Janet; it also awarded Janet a $1.1 million “Grace award” payable in installments as equitable relief despite treating Stephens & Smith as nonmarital.
- The district court awarded Janet alimony under Neb. Rev. Stat. § 42‑362: $1,000 per month for 120 months and required Robert to maintain a $1 million life insurance policy naming Janet beneficiary.
- Janet appealed, challenging (1) the exclusion of Stephens & Smith’s appreciation from the marital estate, (2) the fixed 120‑month duration of statutory support given her continuing mental illness, and (3) ordering transfers in entities where consent of other partners might 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 or nonmarital | Appreciation during the marriage should be marital because Robert’s active managerial efforts caused appreciation; district court erred excluding it | Appreciation is nonmarital; only appreciation caused by nonowning spouse should be marital (or appreciation due to passive market forces) | Court applies active‑appreciation rule: appreciation is marital to the extent caused by active efforts of either spouse; reversed district court and directs inclusion of appreciation in marital estate and remand for equitable division |
| Validity of the district court’s Grace award (lump sum despite classifying Stephens & Smith nonmarital) | Grace award cannot substitute for recognizing marital appreciation under the active‑appreciation rule | Grace award justified equitable result given technical classification | Court vacated Grace award as inseparable from the erroneous nonmarital classification and remanded for proper division |
| Duration of support under Neb. Rev. Stat. § 42‑362 for mentally ill spouse | Support should continue so long as Janet remains mentally ill | Fixed 120‑month award was within court’s discretion | Court affirms trial court’s $1,000/month for 120 months as not an abuse of discretion but notes court may reconsider alimony in light of reclassification of assets |
| Ordering transfer of partnership/LLC interests (vs. cash) when organizational documents may restrict transfers | Transfer may be impractical if other partners won’t consent; court should order cash instead | Transfer of ownership interests is acceptable and equitable; court ordered Robert to complete transfers | Court affirms awarding ownership interests rather than immediate cash; parties may seek modification if transfers cannot be completed |
Key Cases Cited
- Van Newkirk v. Van Newkirk, 212 Neb. 730 (discusses treatment of inherited/premarital property and improvements)
- Rezac v. Rezac, 221 Neb. 516 (recognizes appreciation of premarital corporate stock as marital when caused by owner’s contributions/reinvestment)
- Grace v. Grace, 221 Neb. 695 (affirmed equitable lump‑sum awards despite classifying an asset nonmarital)
- Meints v. Meints, 258 Neb. 1017 (adopts three‑step dual classification process for property division)
- Stanosheck v. Jeanette, 294 Neb. 138 (applies test for when investment growth on nonmarital retirement funds may be nonmarital)
- Coufal v. Coufal, 291 Neb. 378 (applies active‑appreciation analysis to retirement account growth)
- Black v. Black, 223 Neb. 203 (interprets § 42‑362 and holds support for mentally ill spouse should continue only so long as illness continues or spouse remarries)
- Buche v. Buche, 228 Neb. 624 (cited in district court’s reasoning on business appreciation)