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Cite as 297 Neb. 188

Robert L. Stephens, appellee, v. 

Janet E. Stephens, appellant.

___ N.W.2d ___

Filed July 14, 2017. No. S-16-431.

1. 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.

2. 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.

3. Appeal and Error. Errors must be specifically assigned and argued to 

be considered by an appellate court.

4. 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 

enumerated.

5. 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.

6. 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.

7. ____: ____. 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 property.

8. Divorce: Property Division: Pensions. Investment earnings accrued 

during the marriage on the nonmarital portion of a retirement account 

Nebraska Supreme Court Online Library

www.nebraska.gov/apps-courts-epub/

08/18/2017 01:08 AM CDT
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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.

9. 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.

10. Property Division: Words and Phrases. Appreciation caused by marital contributions is known as active appreciation, and it constitutes marital property.

11. ____: ____. Passive appreciation is appreciation caused by separate contributions and nonmarital forces.

12. 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 income.

13. 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 both spouses.

14. 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.

15. ____: ____. 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 significant effect.

16. Property Division: Proof. The burden of proof to show that property is 

nonmarital remains with the person making the claim.

17. 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.

Appeal 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.

David P. Kyker for appellee.
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Heavican, C.J., Wright, Miller-Lerman, Cassel, Kelch, 

and Funke, JJ.

Wright, J.

I. NATURE OF CASE

In this 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 nonowning 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 division.

II. BACKGROUND

Janet 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.

For 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.

A 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.

Both 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.
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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.

1. Stephens & Smith

Stephens & 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.

Robert 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.

Robert 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.

Robert 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 & 
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Smith’s projects, Robert also personally guaranteed millions of 

dollars in loans for Stephens & Smith’s operations.

Robert 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 leadership.”

2. R.I.P., Inc.

R.I.P., 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 through R.I.P.

3. Infinity S Development Co., Heritage Square

Partners, Smith and Stephens Real Estate, 

and Aardvark Partners

(a) Infinity S Development

Infinity 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.
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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.

(b) Heritage Square Partners

Heritage 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.

(c) Smith and Stephens Real Estate

Smith 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 trial.

(d) Aardvark Partners

Aardvark 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 
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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 Infinity.

Aardvark 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.

4. Aardvark Antique Mall, The Mystic

Pines Apartments, and Eagles

Landing Apartments

Robert 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.

Janet’s 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. Robert 

assured the court that the partners having an interest in these 

properties would cooperate.

5. Decree

The court awarded to Robert the marital home, valued at 

$542,000, and the mortgage debt therein, in the amount of 

$337,078. Also awarded to Robert, subject to liens or encumbrances, were a “60-foot Gen[i]e Manlift” valued at $20,000, a 

jet ski valued at $1,740, a 1998 motorcycle valued at $7,625, 

a 2003 automobile valued at $16,904, and a 2005 recreation 
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vehicle valued at $60,250. The only debt associated with 

these items appears to be an automobile loan in the amount 

of $19,893.

Robert was awarded $31,965 in household goods and artwork. Robert was awarded a credit union checking account 

with a balance of $553.50 and a bank checking account with a 

balance of $100. Robert was awarded Stephens & Smith retirement plans valued at $326,104.79. The retirement plans were 

formed after the marriage, and Robert had conceded they were 

marital assets.

Robert was solely responsible for a personal loan in 2009 

from his sister in the amount of $480,589, for the purpose of 

investing in Eagles Landing Apartments and The Mystic Pines 

Apartments. Robert was awarded any and all bank or investment accounts, life insurance policies and annuities, and any 

household goods or personal property in his possession not 

otherwise allocated.

The court awarded to Janet, along with any indebtedness 

thereon, a 2012 automobile valued at $27,357. The court 

awarded to Janet $18,510 in household goods and artwork, 

any and all jewelry, including a $10,000 ring that Janet had 

purportedly flushed down the toilet. It was unclear to what 

extent the other jewelry could be located at the time of trial. 

The jewelry, minus the ring, was appraised at $72,760. Janet 

was awarded an account at a local bank with a balance at the 

time of trial of $10,010. She was awarded any and all bank or 

investment accounts, life insurance policies and annuities, and 

any household goods or personal property in her possession not 

otherwise allocated.

The court found that Robert’s combined interest in Aardvark 

Antique Mall ($66,474), The Mystic Pines Apartments 

($923,687), and Eagles Landing Apartments ($381,385) was 

part of the marital estate. In light of the tax disadvantages of 

the forced buying or selling of the business interests, and the 

court’s trust that Robert would conduct his business affairs so 

as not to disadvantage Janet, the court awarded Robert and 
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Janet each one-half of the total interest in these properties 

through a transfer of ownership. Robert was ordered to complete all documentation of such joint ownership within 30 days 

of the decree.

The court found that Robert’s ownership interests in Infinity, 

Heritage, Smith and Stephens Real Estate, and Aardvark 

Partners were traceable to premarital assets and that the entirety 

of the appreciation in value of these interests during the marriage was excludable from the marital estate, because Robert 

had a “passive” role in such appreciation. It noted that no 

marital assets and no active effort by Janet contributed to these 

entities. The court awarded these interests in their entirety 

to Robert.

The court also found that Robert’s 34 percent ownership 

interest in Stephens & Smith was, in its entirety, nonmarital. 

It did not specifically mention R.I.P. in its decree, which was 

presumably treated as part of Stephens & Smith.

The court noted that no marital funds were contributed to 

Stephens & Smith. And, as for the substantial appreciation of 

the company’s value during the marriage, the court cited Van

Newkirk v. Van Newkirk1 and Buche v. Buche.

2

 Ultimately, the 

court concluded that Robert had met his burden of proof that 

his stock, including the appreciation during the marriage, was 

premarital property. In this regard, the court reasoned that 

the appreciation was “due to a combination of factors, not 

the least of which is organic growth” and that “[t]here is no 

evidence to suggest what part of that growth can be attributed 

to [Robert].”

Although the court concluded that the entirety of Stephens 

& Smith was nonmarital property, it nevertheless awarded 

a “Grace award”3 to Janet based on the court’s valuation of 

Robert’s stock interest in Stephens & Smith. The court found 

1 Van Newkirk v. Van Newkirk, 212 Neb. 730, 325 N.W.2d 832 (1982).

2 Buche v. Buche, 228 Neb. 624, 423 N.W.2d 488 (1988).

3 See Grace v. Grace, 221 Neb. 695, 380 N.W.2d 280 (1986).
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that other considerations and equities present in the case justified an award to Janet of $1.1 million to be paid in installments 

of $100,000 per year, with interest of 2.51 percent on the outstanding balance. The court explained as to the mathematical 

basis for such award that if the appreciation of Robert’s ownership interest in Stephens & Smith were marital, one-third 

of that interest would be $1.55 million and one-half would be 

$2.35 million.

Other marital property, a coin collection and various items 

held in storage units, had not yet been given an estimated 

value and were ordered divided by equal value or sold with 

the proceeds to be divided equally between Robert and Janet.

The court found that Janet was suffering from a mental illness as defined by Neb. Rev. Stat. § 42-362 (Reissue 2016) 

and awarded alimony under § 42-362 in the amount of $1,000 

per month for 120 months. It ordered Robert to maintain until 

August 20, 2020, a life insurance policy in the amount of 

$1 million, with Janet as the beneficiary.

Janet appeals from the decree. Robert did not cross-appeal.

III. ASSIGNMENTS OF ERROR

Janet assigns that the district court erred in (1) finding that 

the appreciation in the value of Stephens & Smith during the 

parties’ marriage should be considered nonmarital, (2) failing 

to find that the spousal support ordered under § 42-362 should 

continue until Janet’s mental disability is corrected, and (3) 

ordering the division of marital property held in a small business or partnership when the articles of organization do not 

allow for the same.

IV. STANDARD OF REVIEW

[1,2] 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.4 A judicial abuse of discretion exists if the reasons or 

4 Stanosheck v. Jeanette, 294 Neb. 138, 881 N.W.2d 599 (2016).
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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.5

V. ANALYSIS

1. Property Division

[3] Janet first assigns as error the district court’s finding 

that the appreciation during the parties’ marriage of Robert’s 

interest in Stephens & Smith should be considered nonmarital. She does not assign as error the court’s determination that 

other assets at issue at trial were nonmarital. Errors must be 

specifically assigned and argued to be considered by an appellate court.6

Thus, we consider only whether the district court erred 

in its classification of Stephens & Smith, together with its 

wholly owned subsidiary, R.I.P.—which we hereafter refer 

to collectively as “Stephens & Smith.” We do not consider 

whether the court erred with respect to its classification 

of Infinity, Heritage, Smith and Stephens Real Estate, or 

Aardvark Partners as nonmarital assets. And because Robert 

did not cross-appeal, neither do we consider whether the 

court erred in designating Aardvark Antique Mall, The Mystic 

Pines Apartments, and Eagles Landing Apartments as marital. 

We do consider the propriety of the “Grace award,” as it is 

inseparable from the court’s determination that Stephens & 

Smith was nonmarital.

Neb. Rev. Stat. § 42-365 (Reissue 2016) provides that when 

a dissolution of marriage is decreed, the court may order the

division of property as may be reasonable, having regard 

for the circumstances of the parties, duration of the marriage, a history of the contributions to the marriage by 

each party, including contributions to the care and education of the children, and interruption of personal careers 

5 Id.

6 Shipler v. General Motors Corp., 271 Neb. 194, 710 N.W.2d 807 (2006).
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or educational opportunities, and the ability of the supported party to engage in gainful employment without 

interfering with the interests of any minor children in the 

custody of such party.

Section 42-365 provides that “[t]he purpose of a property division is to distribute the marital assets equitably between the 

parties.” (Emphasis supplied.)

No statute defines “marital assets.” Neb. Rev. Stat. 

§ 42-366(8) (Reissue 2016) states that in the event the parties 

fail to agree upon a property settlement that is conscionable, 

the court shall order the equitable division of the marital 

estate, which “shall include . . . any pension plans, retirement 

plans, annuities, and other deferred compensation benefits 

owned by either party, whether vested or not vested.” But no 

statutory provision relating to the equitable division of property specifically addresses business entities or the concept 

of appreciation.

[4] We find no merit to Robert’s argument that § 42-366 

is a legislative mandate to exclude from the marital estate 

items not specifically listed in § 42-366. 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 enumerated.7 And § 42-366 

seems particularly concerned with clarifying the status of 

nonvested assets. Business interests like Stephens & Smith, 

and indeed many other assets such as the marital home, do 

not fall into that category. Thus, it is no surprise that they 

are not enumerated. Moreover, while the Legislature specified the condition in § 42-366(8) “owned by either party” as 

7 See Samantar v. Yousuf, 560 U.S. 305, 130 S. Ct. 2278, 176 L. Ed. 

2d 1047 (2010). See, also, Stansell v. Revolutionary Armed Forces of 

Colombia, 704 F.3d 910 (11th Cir. 2013); Federal Election Com’n v. Mass. 

Citizens for Life, 769 F.2d 13 (1st Cir. 1985); Highway & City Freight 

Drivers, Etc. v. Gordon, 576 F.2d 1285 (8th Cir. 1978); Matter of Adoption 

by W.P. and M.P., 308 N.J. Super. 376, 706 A.2d 198 (1998); Auer v. Com., 

46 Va. App. 637, 621 S.E.2d 140 (2005).
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to the assets listed, we have held as to these listed assets that 

only the portion of such deferred compensation benefits that 

was earned or contributed to during the marriage is part of the 

marital estate.8 In sum, § 42-366 does not indicate whether 

appreciation during the marriage of a nonmarital business or 

property interest is a marital asset. That question has instead 

long been determined by case law.

[5] Since 2000, we classify as a threshold matter the parties’ 

property as either marital or nonmarital. In Meints v. Meints,

9

we said:

Equitable property division under § 42-365 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.

Such division between the marital and nonmarital estate is 

known as dual classification. Prior to Meints, our case law 

was not entirely clear as to whether we operated under a dual 

classification system. Most jurisdictions adopt the dual classification model and preclude under this model the equitable 

distribution of separate property.10 “Equitable considerations 

are generally no excuse for failing to follow the statutory classification process.”11

[6,7] We have said that 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 

8 See, e.g., Coufal v. Coufal, 291 Neb. 378, 866 N.W.2d 74 (2015).

9 Meints v. Meints, 258 Neb. 1017, 1023, 608 N.W.2d 564, 569 (2000). See, 

also, 3 Brett R. Turner, Equitable Distribution of Property, appendix A at 

274 (3d ed. 2005).

10 See 1 Brett R. Turner, Equitable Distribution of Property § 2:10 (3d ed. 

2005).

11 See id., § 5:7 at 266.
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general rule.12 Thus, for example, income from either party 

that accumulates during the marriage is a marital asset.13 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 property.14 Therefore, 

the original capital or value of an asset may be nonmarital, 

while all or some portion of the earnings or appreciation of 

that asset may be marital.15

[8] In the recent case of Stanosheck v. Jeanette,

16 we said 

that investment earnings accrued during the marriage on the 

nonmarital portion of a retirement account 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. In Coufal v. Coufal,

17 we similarly examined 

whether the increase in the value of the premarital capital in a 

retirement account was a marital asset. After examining cases 

from other jurisdictions discussing the active appreciation rule, 

we held that the appreciation was nonmarital, because it was 

not caused by the direct or indirect efforts of “either spouse.”18

[9-11] Other jurisdictions have reached a “remarkable 

degree of consensus” that appreciation or income of separate 

property is marital property to the extent that it was caused 

by marital funds or marital efforts.19 The active appreciation 

12 See Heald v. Heald, 259 Neb. 604, 611 N.W.2d 598 (2000).

13 See Harris v. Harris, 261 Neb. 75, 621 N.W.2d 491 (2001).

14 See 1 Turner, supra note 10, § 5:20.

15 See id.

16 Stanosheck v. Jeanette, supra note 4.

17 Coufal v. Coufal, supra note 8.

18 Id. at 384, 866 N.W.2d at 79.

19 1 Turner, supra note 10, § 5:54 at 546. See, also, Annot., 39 A.L.R.6th 205 

(2008).
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rule sets forth the relevant test to determine to what extent 

marital efforts caused any part of the appreciation or income.20

“Appreciation caused by marital contributions is known as 

active appreciation, and it constitutes marital property in the 

first instance.”21 In contrast, passive appreciation is appreciation caused by separate contributions and nonmarital forces.22

And most states, by statute or case law, define marital contribution broadly to include the efforts of either the owning or the 

nonowning spouse.23

Robert, however, argues that Stanosheck and Coufal, inasmuch as they recognize as marital property growth due to 

the efforts of the owning spouse, are limited to retirement 

accounts. He argues that appreciation of business interests 

outside of retirement accounts should be considered a marital 

asset only if the appreciation during the marriage was caused 

by the efforts of the nonowning spouse.

In support of this position, Robert relies on statements by 

this court in cases decided before we clearly adopted a dual 

classification system24 and under facts demonstrating that the 

appreciation of the nonmarital asset was due principally to 

inflation and market forces.25 Under these circumstances, in 

Van Newkirk v. Van Newkirk, we said that property acquired 

by gift or inheritance is not considered part of the marital 

estate unless

20 See 1 Turner, supra note 10, § 5:55.

21 Id. at 549.

22 Id.

23 Id., § 5:56. See, also, e.g., Hanson v. Hanson, 125 P.3d 299 (Alaska 

2005); Horton v. Horton, 299 Ga. 46, 785 S.E.2d 891 (2016); Nardini 

v. Nardini, 414 N.W.2d 184 (Minn. 1987). See, generally, 39 A.L.R.6th, 

supra note 19.

24 See Matlock v. Matlock, 205 Neb. 357, 287 N.W.2d 690 (1980) 

(consideration of inherited property depends on equities involved).

25 See, Preston v. Preston, 241 Neb. 181, 486 N.W.2d 902 (1992); Ross v. 

Ross, 219 Neb. 528, 364 N.W.2d 508 (1985); Van Newkirk v. Van Newkirk, 

supra note 1.
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both of the spouses have contributed to the improvement 

or operation of the property which one of the parties 

owned prior to the marriage or received by way of gift 

or inheritance, or the spouse not owning the property 

prior to the marriage or not receiving the inheritance or 

gift has significantly cared for the property during the 

marriage.26

But in Rezac v. Rezac,

27 decided only 3 years after Van 

Newkirk, we recognized as a marital asset the appreciation 

of nonmarital property due solely to the contributions of the 

owning spouse during the marriage. We held in Rezac that 

the lower court did not err in dividing as marital property the 

entirety of the appreciated value of the husband’s premarital 

stock in a corporation. We explained that if the husband’s ownership of the corporation had been merely “nominal” or the 

increase in the value of the stock during the marriage had been 

“strictly an inflationary increase,”28 there would have been a 

better argument that the stock should be viewed as continuing 

to be separate property. But such was not the case.

We observed in Rezac that the lower court was correct in 

treating the appreciation of stock as marital property, because 

the corporation had paid for substantial improvements that 

increased the corporate value, in lieu of distributing profits to 

its owners as income. We explained that “had the corporation 

not made substantial investments in improving its facility, the 

value of the stock may have remained about the same but this 

respondent would have received additional income resulting in 

marital assets which would be subject to division at the time 

of the dissolution.”29

26 Van Newkirk v. Van Newkirk, supra note 1, 212 Neb. at 733, 325 N.W.2d 

at 834.

27 Rezac v. Rezac, 221 Neb. 516, 378 N.W.2d 196 (1985).

28 Id. at 518, 378 N.W.2d at 198.

29 Id. See, also, Sughroue v. Sughroue, 19 Neb. App. 912, 815 N.W.2d 210 

(2012).
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Though we observed in Rezac that the appreciation was 

through reinvestment of income, other courts and legal 

authorities find no meaningful distinction between appreciation through reinvestment of income and appreciation through 

active efforts other than reinvestment.30 Income from and 

appreciation of an asset are fundamentally similar insofar as 

they are both ways that the property generates value.31 The 

only difference is that income takes the form of a new asset, 

while appreciation takes the form of added value.32 This difference in form bears “no relation to the policies behind equitable distribution.”33

Nevertheless, in Grace v. Grace,

34 a case decided a few 

years after Van Newkirk and Rezac, we implicitly accepted 

without analysis an appreciation/income distinction. There, 

because of the inequities created by the application of such 

a distinction, we were compelled to consider the value of 

nonmarital assets in determining the equitable amount of the 

property division.

In Grace, we applied our statement in Van Newkirk to hold 

that the husband’s interest in a premarital family business was 

nonmarital. Then we said that whether an asset is marital is 

but one consideration in the equitable division of property.35

Especially in light of the minimal accumulation of marital 

assets due to the provision by the business of the marital home 

and other expenses, we held that the wife should be awarded 

a lump sum representing her portion of the husband’s corporate interest—even though the wife did not contribute to the 

improvement or operation of the business.

30 See 1 Turner, supra note 10, § 5:50 (and cases cited therein).

31 See id., § 5:50.

32 See id.

33 Id. at 524.

34 Grace v. Grace, supra note 3.

35 Id.
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A series of cases from the Nebraska Court of Appeals have 

since recognized so-called Grace awards in order to achieve an 

equitable result when the application of our statement in Van 

Newkirk renders appreciation during the marriage nonmarital.36

It has not been clear under this line of case law what exceptional circumstances warrant a Grace award. The mathematics 

behind the amount of such Grace awards have likewise never 

been clear. But Grace awards generally represent a smaller 

division of the asset in question than the expected division if 

the asset were considered marital.37

We find inapplicable to the modern dual classification 

system any statements in Van Newkirk and its progeny which 

fail to recognize as a marital asset appreciation through the 

active efforts of the owning spouse. For purposes of the active 

appreciation rule, there is no reason to treat appreciation of 

a nonmarital asset differently from income derived from a 

nonmarital asset during the marriage. We conclude, likewise, 

that the principles set forth in Grace are no longer applicable 

to the dual classification system set forth by this court in 

Meints v. Meints.

38 This is not to say that a court would, in 

every conceivable circumstance, be forbidden from taking 

into account nonmarital assets in its equitable division of the 

marital estate, but our adoption of the active appreciation 

rule as set forth herein limits the need for such an extraordinary recourse.

[12] We hold, therefore, that the principles set forth in 

Stanosheck apply equally to appreciation or income during 

the marriage of any nonmarital asset. Thus, accrued investment earnings or appreciation of nonmarital assets during 

36 See, Keig v. Keig, 20 Neb. App. 362, 826 N.W.2d 879 (2012); Shuck v. 

Shuck, 18 Neb. App. 867, 806 N.W.2d 580 (2011); Charron v. Charron, 

16 Neb. App. 724, 751 N.W.2d 645 (2008); Walker v. Walker, 9 Neb. App. 

834, 622 N.W.2d 410 (2001).

37 See id.

38 Meints v. Meints, supra note 9.
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the marriage are presumed marital unless the party seeking 

the classification of the growth as nonmarital proves: (1) The 

growth is readily identifiable and traceable to the nonmarital 

portion of the account and (2) the growth is not due to the 

active efforts of either spouse.39 We agree with many other 

jurisdictions that the burden is on the owning spouse to prove 

the extent to which marital contributions did not cause the 

appreciation or income.40 This is the better policy, because it 

places the burden on the party who has the best access to the 

relevant evidence.41

[13] We expressly adopt the active appreciation rule that 

does not distinguish between the efforts of the owning spouse 

and the efforts of the nonowning spouse. We agree that the 

majority rule recognizing as a marital contribution the efforts 

of either the owning or the nonowning spouse is “clearly correct, as the marital estate should include the fruits of either 

spouse’s efforts during the marriage.”42 We hold that the appreciation or income of a nonmarital asset during the marriage is 

marital insofar as it was caused by the efforts of either spouse 

or both spouses.

Under the district court’s interpretation of our admittedly 

confusing line of case law, it concluded that appreciation 

39 Stanosheck v. Jeanette, supra note 4.

40 1 Turner, supra note 10, § 5:56.

41 See id., citing Harrower v. Harrower, 71 P.3d 854 (Alaska 2003); Chapman 

v. Chapman, 866 So. 2d 118 (Fla. App. 2004); Macdonald v. Macdonald, 

532 A.2d 1046 (Me. 1987); Berenberg v. Berenberg, 474 N.W.2d 843 

(Minn. App. 1991); Waring v. Waring, 747 So. 2d 252 (Miss. 1999); 

Klaus v. Klaus, 918 S.W.2d 407 (Mo. App. 1996); Jurado v. Jurado, 119 

N.M. 522, 892 P.2d 969 (N.M. App. 1995); Pulice v. Pulice, 242 A.D.2d 

527, 661 N.Y.S.2d 675 (1997); Ciobanu v. Ciobanu, 104 N.C. App. 461, 

409 S.E.2d 749 (1991); Thielenhaus v. Thielenhaus, 890 P.2d 925 (Okla. 

1995); Garfinkel v. Garfinkel, 945 S.W.2d 744 (Tenn. App. 1996); Mayhew 

v. Mayhew, 205 W. Va. 490, 519 S.E.2d 188 (1999); In re Marriage of 

Popp v. Popp, 146 Wis. 2d 778, 432 N.W.2d 600 (Wis. App. 1988).

42 1 Turner, supra note 10, § 5:56 at 564.
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of Stephens & Smith due to Robert’s active efforts was not 

includable in the marital estate. The court accordingly made no 

findings concerning what portion of Stephens & Smith’s appreciation was attributable to Robert’s active efforts. Because 

Janet did not directly contribute to Stephens & Smith, the court 

concluded that the entirety of Stephens & Smith’s appreciation 

during the marriage was nonmarital. In its attempt to make an 

equitable distribution after having thus excluded approximately 

$5 million from the marital estate, the court awarded as a 

Grace award approximately one-fourth of Robert’s 34-percent 

interest in Stephens & Smith.

Based upon the active appreciation rule, the court should 

not have excluded Stephens & Smith from the marital estate 

and substituted a Grace award. We reverse the court’s determination of the marital property to the extent that it did not 

include the increase in value of Robert’s interest in Stephens 

& Smith, and we vacate the court’s Grace award.

The classification of the growth in value of Robert’s stock, 

including that due to retained earnings by Stephens & Smith,43

depends on the extent that the overall growth of the company 

was caused by Robert’s active efforts. In this case, there was 

no dispute that Stephens & Smith appreciated significantly 

during the marriage and that Robert’s active efforts played a 

significant role in that appreciation. Indeed, the underlying 

facts were not contested. Robert, cofounder and president of 

Stephens & Smith, worked full time in that capacity during the 

entirety of the 25-year marriage.

[14,15] 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.44 First-tier 

management is responsible for ensuring the policy, direction, 

and good will that contributes most directly to the value of a 

43 See id., § 5:53.

44 See id., § 5:57.
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company’s stock.45 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 

significant effect.46

Even favorable market conditions are not passive inasmuch 

as they create merely the opportunity that the skilled, owning spouse detects and seizes.47 Nor does an argument that 

the “‘ground work’” for growth was laid before the marriage 

preclude as a marital asset substantial appreciation of a company’s value during the marriage.48 No person wears all hats 

in a complex business operation, but it is nevertheless possible 

for one person to be critical to such operation’s growth and 

development.49 The appreciation of a company’s stock may be 

due not just to a first-tier manager’s direct efforts, but to his or 

her mere presence, when the individual is identified with the 

business entity and tied to its good will.50

[16] It was Robert’s burden to demonstrate that any portion 

of Stephens & Smith’s appreciation was due to passive forces 

or the active efforts of third parties who would qualify as firsttier management or similar. In presenting the evidence at trial, 

Robert was on notice of the possibility that the court would 

apply the active appreciation rule. And it has been the longstanding position of this court that the burden of proof to show 

that property is nonmarital remains with the person making 

the claim.51 In light of this burden of proof, it is clear on the 

record presented that Robert’s active efforts were responsible 

45 See, Hanson v. Hanson, supra note 23; Berrie v. Berrie, 252 N.J. Super. 

635, 600 A.2d 512 (1991); 1 Turner, supra note 10, § 5:57.

46 1 Turner, supra note 10, § 5:57.

47 See id.

48 See Innerbichler v. Innerbichler, 132 Md. App. 207, 231, 752 A.2d 291, 

304 (2000).

49 Id.

50 See Berrie v. Berrie, supra note 45.

51 Heald v. Heald, supra note 12.
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for at least 34 percent of Stephens & Smith’s growth during 

the 25 years that Robert and Janet were married.

We accordingly direct the court to consider as marital 

the entirety of the increase during the marriage of Robert’s 

34-percent stock interest in Stephens & Smith. Because the 

district court is in the better position to make an equitable 

division, we remand the cause with directions to determine the 

equitable distribution of that marital asset.

2. Spousal Support

We turn next to Janet’s allegation that the district court erred 

in failing to award spousal support under § 42-362 for so long 

as she remains mentally ill. Janet does not take issue with the 

monthly amount that was awarded, only its duration.

Section 42-362 states in relevant part:

When a marriage is dissolved and the evidence indicates 

that either spouse is mentally ill, the court may, at the 

time of dissolving the marriage or at any time thereafter, 

make such order for the support and maintenance of such 

mentally ill person as it may deem necessary and proper, 

having due regard to the property and income of the parties, and the court may require the party ordered to provide support and maintenance to file a bond or otherwise 

give security for such support. Such an order for support 

may be entered upon the application of the guardian or 

guardian ad litem or of any person, county, municipality, 

or institution charged with the support of such mentally 

ill person. The order for support may, if necessary, be 

revised from time to time on like application.

[17] The amount of support awarded under § 42-362 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.52

52 Black v. Black, 223 Neb. 203, 388 N.W.2d 815 (1986).
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Section 42-362 empowers the court to order the payment of 

such support and maintenance “‘as it may deem necessary and 

proper, having due regard to the property and income of the 

parties’” and, to that extent, parallels the alimony contemplated 

by § 42-365, but provides an additional specific ground to be 

considered—the mental illness of a spouse.53

However, support and maintenance of a mentally ill spouse 

and alimony are not the same in all respects.54 In Black v. 

Black,

55 we said that although allowances of alimony in the 

form of requiring one to pay a fixed sum for an indefinite 

period of time are not favored, payment of support and maintenance of a mentally ill spouse “should continue so long as, 

and only so long as, the mental illness continues” or the spouse 

remarries. We accordingly modified the dissolution court’s 

award of spousal support under § 42-362 until death or remarriage to provide that it shall continue only so long as the mental illness continued and the spouse did not remarry.

We have never held that a court must always award support under § 42-362 for so long as the mental illness continues. Nothing in the language of the statute indicates this 

is required. Rather, § 42-362 contemplates that the order of 

support under this section “may, if necessary, be revised from 

time to time on like application.” We find that the district 

court did not abuse its discretion in making the award for 120 

months. Because of our determination that Stephens & Smith 

is a marital asset, the court in its discretion may reconsider the 

amount of alimony.56

53 Id. at 208, 388 N.W.2d at 819.

54 Id.

55 Id. at 209, 388 N.W.2d at 820.

56 See, Pendleton v. Pendleton, 242 Neb. 675, 496 N.W.2d 499 (1993); 

Olson v. Olson, 195 Neb. 8, 236 N.W.2d 618 (1975); Corn v. Corn, 190 

Neb. 383, 208 N.W.2d 678 (1973) (although alimony and distribution of 

property are technically distinct and have different purposes in marriage 

dissolution proceedings, they are closely related and circumstances may 

require that they be considered together).
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3. Articles of Incorporation

Janet last assigns as error the fact that the court ordered 

the transfer to her of ownership interests in Aardvark Antique 

Mall, The Mystic Pines Apartments, and Eagles Landing 

Apartments, instead of a cash award. Janet’s sole objection 

is her concern that the other partners will not consent to her 

co-ownership. Robert was ordered to complete all documentation of such joint ownership within 30 days of the decree. 

In the event that did not occur, and it appears that a transfer 

of ownership will not take place in spite of Robert’s best 

efforts, then the parties are free to seek modification of the 

decree.57 The court did not abuse its discretion in not ordering 

a cash award.

VI. CONCLUSION

We affirm the distribution of ownership interests in 

Aardvark Antique Mall, The Mystic Pines Apartments, and 

Eagles Landing Apartments, instead of a cash award. We 

reverse the division of the property described as Stephens & 

Smith and direct the court to include the increase in value 

from the date of the marriage to the dissolution as a marital 

asset. The Grace award is reversed and vacated, because the 

court is directed to include the increase in value of Robert’s 

interest in Stephens & Smith as a marital asset. We affirm the 

award of alimony subject to the court’s discretion as set forth 

in this opinion.

 Affirmed in part, vacated in part, and in part

reversed and remanded with directions.

Stacy, J., not participating.

57 See Whitesides v. Whitesides, 290 Neb. 116, 858 N.W.2d 858 (2015).