Robert L. Stephens, appellee,
Janet E. Stephens, appellant.
Divorce: Appeal and Error. In actions for
dissolution of marriage, an appellate court reviews the case
de novo on the record to determine whether there has been an
abuse of discretion by the trial judge.
Judges: Words and Phrases. A judicial abuse
of discretion exists if the reasons or rulings of a trial
judge are clearly untenable, unfairly depriving a litigant of
a substantial right and denying just results in matters
submitted for disposition.
Appeal and Error. Errors must be
specifically assigned and argued to be considered by an
Statutes: Words and Phrases. Traditionally,
the word "include" in a statute connotes that the
provided list of components is not exhaustive and that there
are other items includable though not specifically
Property Division. Equitable property
division under Neb. Rev. Stat. § 42-365 (Reissue 2016)
is a three-step process. The first step is to classify the
parties' property as marital or nonmarital. The second
step is to value the marital assets and determine the marital
liabilities of the parties. The third step is to calculate
and divide the net marital estate between the parties in
accordance with the principles contained in § 42-365.
Divorce: Property Division. All property
accumulated and acquired by either spouse during the marriage
is part of the marital estate, unless it falls within an
exception to this general rule.
___. Any given property can constitute a mixture of marital
and nonmarital interests; a portion of an asset can be
marital property while another portion can be separate
Divorce: Property Division: Pensions.
Investment earnings accrued during the marriage on the
nonmarital portion of a retirement account [297 Neb. 189] may
be classified as nonmarital where the party seeking the
classification proves: (1) The growth is readily identifiable
and traceable to the nonmarital portion of the account and
(2) the growth is due solely to inflation, market forces, or
guaranteed rate rather than the direct or indirect effort,
contribution, or fund management of either spouse.
Divorce: Property Division. The active
appreciation rule sets forth the relevant test to determine
to what extent marital efforts caused any part of the
appreciation or income.
Property Division: Words and Phrases.
Appreciation caused by marital contributions is known as
active appreciation, and it constitutes marital property.
___: ___. Passive appreciation is appreciation caused by
separate contributions and nonmarital forces.
Divorce: Property Division: Proof. The
burden is on the owning spouse to prove the extent to which
marital contributions did not cause the appreciation or
Divorce: Property Division. Appreciation or
income of a nonmarital asset during the marriage is marital
insofar as it was caused by the efforts of either spouse or
Corporations: Employer and Employee. Despite
the importance of each employee in a company, a company's
value for purposes of active appreciation is attributable
only to the efforts of first-tier management or similar
persons with control over the asset's value.
___: ___. Courts have uniformly rejected arguments by the
owning spouse that the universe of persons in a company that
effect its value is so large that no one person has any
Property Division: Proof. The burden of
proof to show that property is nonmarital remains with the
person making the claim.
Divorce: Mental Competency. The amount of
support awarded under Neb. Rev. Stat. § 42-362 (Reissue
2016) is a matter initially entrusted to the sound discretion
of the trial judge, which award, on appeal to this court, is
reviewed de novo on the record and affirmed in the absence of
an abuse of the trial judge's discretion.
from the District Court for Lancaster County: Robert R. Otte,
Judge. Affirmed in part, vacated in part, and in part
reversed and remanded with directions.
Stefanie Flodman and Steven J. Flodman, of Johnson, Flodman,
Guenzel & Widger, for appellant.
P. Kyker for appellee.
Neb. 190] Heavican, C.J., Wright, Miller-Lerman, Cassel,
Kelch, and Funke, JJ.
NATURE OF CASE
dissolution action, the husband is the cofounder and
president of a C corporation and owns 34 percent of its
stock. He asserts that only the appreciation, during the
marriage, of a business interest that is due to the active
efforts of the non-owning spouse is part of the marital
estate. He claims, therefore, that none of the almost $5
million in appreciation of his stock interest during the
parties' 25-year marriage was subject to equitable
E. Stephens and Robert L. Stephens were married on September
8, 1991. Twin boys were born of the marriage in 1996. Robert
filed for dissolution in 2014.
approximately 15 years of the marriage, Janet worked as a
real estate agent. But during the last 10 years of the
marriage, Janet suffered from a mental illness that required
periodic hospitalization and left her unable to work. She
receives approximately $1, 500 per month in Social Security
disability income. Robert testified that he did not expect
Janet would recover and become employable in the future.
guardian ad litem (GAL) was appointed to protect Janet's
interests at trial. The GAL is also Janet's guardian and
conservator. Janet refused to participate in the dissolution
proceedings but was represented by counsel.
before and during the marriage, Robert worked full time as
president of Stephens & Smith Construction Co., Inc.
(Stephens & Smith), and his current annual salary is
approximately $265, 000 per year. Robert received additional
income from bonuses and from his other business interests. In
2014, Robert's total taxable income was $503, 414. When
Janet's mental health allowed, she shared equally with
Robert the tasks relating to the care of their children.
Neb. 191] The principal issue at trial was what assets should
be considered marital and subject to equitable division. The
approximate total value of the assets under the court's
consideration in the dissolution action was $9 million. There
were 166 exhibits entered into evidence without objection,
and Robert was the only witness.
Stephens & Smith
& Smith is a construction company specializing in
concrete work. At all relevant times before and during the
marriage, Robert owned stock totaling 34 percent of the stock
of Stephens & Smith. Robert cofounded Stephens &
Smith in 1971 as a partnership with Michael Smith. Stephens
& Smith was incorporated as a C corporation in 1974.
According to the exhibits in the record, Robert's stock
in Stephens & Smith was worth $298, 459 in 1991 before
the parties married. Robert's stock in Stephens &
Smith at the time of dissolution was worth $5, 044, 934.16.
worked a "normal eight-hour day, " 5 days a week,
in his capacity as president. At other times during the
marriage, he worked more. He was also on the 12-member board
of directors. Robert admitted that he sets his own salary and
has a significant role in determining bonuses.
testified that the leadership personnel of Stephens &
Smith has not changed since the marriage. He described
Stephens & Smith as consisting of six moneymaking
departments, each with its own department head. Robert was
involved in selecting and training the leadership within
Stephens & Smith. At all times during the marriage,
Stephens & Smith had approximately 200 employees. Robert
considered at least 20 of those employees "integral,
" though he believed every employee was important.
described his role as president as "constantly
changing." He made financial and investment decisions
for Stephens & Smith and performed "some management
real estate oversight." As part of obtaining lending to
fund Stephens & [297 Neb. 192] Smith's projects,
Robert also personally guaranteed millions of dollars in
loans for Stephens & Smith's operations.
attended human resources, rental management, shareholder, and
board meetings. He occasionally consulted with and advised
the department heads for the company. Robert conceded that he
was an integral part of the success of Stephens & Smith.
But Robert suggested that, based on his latest bonus of 6
percent, "maybe I provide 6 percent of the
Inc., is a wholly owned subsidiary of Stephens & Smith.
It holds Stephens & Smith's real estate investments
and represents approximately two-thirds of Stephens &
Smith's value. R.I.P. was created before the marriage
with capital from Stephens & Smith, and continued
thereafter to be funded by the profits of Stephens &
Smith. R.I.P. owns a percentage of The Mystic Pines
Apartments, L.L.C.; Eagles Landing Apartments, LLC; Aardvark
Antique Mall, LLC; and Village Square Apartments, LLC.
Although there was no testimony specifically on this point,
Robert's estimated interest in Stephens & Smith of
$5, 044, 934.16 apparently includes any interests held
Infinity S Development Co., Heritage Square Partners, Smith
and Stephens Real Estate, and Aardvark Partners
Infinity S Development
S Development Co. (Infinity) is a partnership between Robert,
Smith, and one other partner. Infinity is predominantly
involved in the self-storage business, and at the time of
trial, it owned approximately 900 storage units. At one
point, Robert testified that no capital has been added to
Infinity since the marriage. Its expansion has been paid for
with the partnership's profits. Robert also indicated,
however, that as with Stephens & Smith, he had personally
guaranteed bank loans to Infinity.
Neb. 193] The day-to-day operation of Infinity is run by a
hired manager. But Robert and the two other partners make the
larger decisions, such as what to build. Robert participates
in monthly meetings to analyze occupancy rates and financial
statements. Robert owns one-fourth of Infinity. According to
the exhibits in evidence, at the time of trial, Robert's
equity interest in Infinity was $1, 243, 232. In contrast,
when the parties married, Robert's interest in Infinity
was worth $270, 553.
Heritage Square Partners
Square Partners (Heritage) was formed as an offshoot of
Infinity just prior to the marriage. The partnership consists
of Robert; Smith; and, originally, three other persons. It
owns one building that was capitalized with funds from
Infinity and with loans. No other funds have been funneled
into Heritage since the marriage. The building provides
rental income and is managed by a person employed by the
partnership. Robert is not involved in the day-to-day
operation of Heritage. At the time of trial, Robert's
equity interest in Heritage was $403, 884. It was unclear
what the value of Robert's interest in Heritage was at
the time the parties married.
Smith and Stephens Real Estate
and Stephens Real Estate was created by Robert and Smith
before the marriage and owns a single piece of property that
was purchased before the marriage. The value of Robert's
interest in Smith and Stephens Real Estate when the parties
married was $88, 830, and it was $140, 000 at the time of
Partners, LLC, was formed after the marriage. It was formed
by the five partners of Infinity and with R.I.P. as the sixth
partner. R.I.P. owns 50 percent of Aardvark Partners. The
$500, 000 purchase of the real estate held by Aardvark
Partners was capitalized with $50, 000 from each of five
individual [297 Neb. 194] investor partners from Infinity and
$250, 000 from R.I.P. Each individual obtained the $50, 000
contribution through a distribution of $55, 000 from
Partners owns a property that consists of a cluster of
buildings and parking lots. Robert is not involved in the
day-to-day operation of Aardvark Partners, which is run by a
hired manager. At the time of trial, Robert's interest in
Aardvark Partners was valued at $306, 429.
Aardvark Antique Mall, The Mystic Pines Apartments, and
Eagles Landing Apartments
conceded at trial that his ownership interests in Aardvark
Antique Mall, The Mystic Pines Apartments, and Eagles Landing
Apartments were marital property. At the time of trial,
Aardvark Antique Mall was valued at $66, 474, The Mystic
Pines Apartments were valued at $923, 687, and Eagles Landing
Apartments were valued at $381, 385. Robert's combined
interest in the three properties produced approximately $60,
000 per year in owner draws, and he proposed that it would be
most beneficial for all parties to transfer to Janet the
ownership interest in these properties.
attorney and GAL questioned the practicality of making Janet
part-owner of the properties. Janet's counsel also
pointed out that transfer of ownership would require the
cooperation of the other partners, since at least two of the
entities required owner approval before allowing new members.