DRASKOVICH VS. DRASKOVICH

Statutes cited

Key holdings

Practitioner summary

Standard of review: factual classification of property is reviewed for substantial evidence, but application of a presumption is reviewed de novo. Waldman v. Maini, 124 Nev. 1121, 1128, 195 P.3d 850, 855 (2008). Alimony is reviewed for abuse of discretion. Kogod v. Cioffi-Kogod, 135 Nev. 64, 66, 439 P.3d 397, 400 (2019). Doctrinal framework: Under NRS 123.220, property acquired during marriage is presumptively community property, and the spouse claiming it as separate must prove the separate interest by clear and convincing evidence. Pryor v. Pryor, 103 Nev. 148, 150, 734 P.2d 718, 719 (1987). Property brought into the marriage, along with its "rents, issues and profits," is separate. NRS 123.130; Smith v. Smith, 94 Nev. 249, 251, 578 P.2d 319, 320 (1978). The court reaffirmed that the presumption applies to entities created during marriage from mixed funds, citing Moberg v. First Nat'l Bank of Nev., 96 Nev. 235, 237, 607 P.2d 112, 114 (1980). Holding on classification: The act of incorporating a business during marriage is not dispositive of its character. Drawing on Schulman v. Schulman, 92 Nev. 707, 558 P.2d 525 (1976), and the California decision In re Marriage of Koester, 87 Cal. Rptr. 2d 76 (Ct. App. 1999), the court expressly held that "district courts must consider the totality of the circumstances when determining whether a business represents the continuation of a pre-marriage enterprise." Where the essential nature, clientele, staff, assets, location, and operations of the practice continued unchanged, a name change and incorporation are mere changes in "form or identity," not a new acquisition. On the uncontested record - same office, same clients, same staff, same assets, only letterhead and vehicle names changed - DLG is a continuation of Robert's pre-marriage interest in T&D and is therefore his separate property. Application of the community property presumption based solely on the date of incorporation was legal error. Apportionment framework on remand: Increases in value of separate property attributable to community contribution must be apportioned. Johnson v. Johnson, 89 Nev. 244, 246, 510 P.2d 625, 626 (1973). The "rents, issues, and profits" of separate property are presumptively separate. Smith, 94 Nev. at 251, 578 P.2d at 320. The non-owner spouse asserting a community interest in the appreciation of separate property bears the burden of proving the community share by clear and convincing evidence. Kelly v. Kelly, 86 Nev. 301, 310, 468 P.2d 359, 365 (1970) (citing Barrett v. Franke, 46 Nev. 170, 208 P. 435 (1922)); see also Sprenger v. Sprenger, 110 Nev. 855, 858, 878 P.2d 284, 286 (1994). The community is entitled to portions "purchased with community funds or credit or acquired by . . . community toil or talent." Kelly, 86 Nev. at 310, 468 P.2d at 365. The non-owner spouse may make this showing by demonstrating that the owner-spouse's labor during the marriage increased the firm's value, because "[t]he labor and skills of a spouse belong to the community." Sly v. Sly, 100 Nev. 236, 240, 679 P.2d 1260, 1263 (1984) (citing Ormachea v. Ormachea, 67 Nev. 273, 297, 217 P.2d 355, 467 (1950)). On remand, the district court is instructed to follow Kelly v. Kelly and permit Laurinda to attempt to make that clear and convincing showing, and to apportion DLG between separate and community interests if appropriate. Alimony: NRS 125.150(1)(a) permits alimony "as appears just and equitable," and Kogod, 135 Nev. at 74-75, 439 P.3d at 406, requires district courts to consider the passive income generation capacity from community property when awarding alimony. Because the trial court's alimony denial relied in part on the passive-income capacity of community assets distributed to Laurinda - a distribution that will change in light of the reclassification of DLG - the alimony ruling was vacated and remanded for reconsideration. Scope: The court declined to address other portions of the decree not raised by the parties. Powell v. Liberty Mut. Fire Ins. Co., 127 Nev. 156, 161 n.3, 252 P.3d 668, 672 n.3 (2011).

In plain language

Robert Draskovich is a criminal defense lawyer who has been practicing since 1997. When he married Laurinda in 2012, he was already a 65% partner in a law firm called Turco & Draskovich (T&D), where he had his own clients, staff, and pay separate from his only partner. Laurinda did not bring significant assets to the marriage and was a homemaker. In December 2018, T&D dissolved. The next month, Robert formed a new corporation called the Draskovich Law Group (DLG), which he wholly owned. According to uncontested testimony, DLG was "the very same practice" as Robert's share of T&D - same office, same clients, same staff, same assets. Only the letterhead and the name on the firm vehicles changed. By the time the divorce began in 2022, DLG was worth roughly $1,210,000. The trial judge ruled that because DLG was incorporated during the marriage, it was presumed to be community property (property owned jointly by both spouses) under Nevada law, and that Robert had not produced clear and convincing evidence of a separate property value. So the judge treated the entire firm as community property. The judge also denied Laurinda's request for alimony, partly because she would receive enough community assets to generate over $3,000 per month in passive income. The Nevada Supreme Court reversed the community property ruling. It held that simply incorporating a business during a marriage does not automatically make the business community property. Courts must look at the "totality of the circumstances" to decide whether a business is genuinely a new acquisition or just a continuation of a pre-marriage enterprise under a new corporate name. Here, every meaningful aspect of Robert's law practice continued unchanged from T&D into DLG, so DLG is the continuation of his pre-marriage practice and is his separate property. That does not end the analysis. A separate-property business can still grow during a marriage because of the working spouse's labor or because of community resources, and the community is entitled to a fair share of that kind of growth. On remand, Laurinda will have the chance to prove by clear and convincing evidence what portion (if any) of DLG's increase in value during the marriage is attributable to community sources, such as Robert's "toil or talent" during the marriage. If she makes that showing, the district court must apportion DLG's value between separate and community interests. Because the alimony decision rested partly on how community property was distributed, and because that distribution will change once DLG is reanalyzed, the Supreme Court also vacated the alimony ruling and sent it back for fresh consideration.