Clarifying “Ability to Pay” in Alimony Contempt: Assets and Borrowing Capacity Must Be Considered; Good‑Faith Career Changes Can Warrant Modification

Introduction

In Peery v. Peery, 2025 S.D. 57, the Supreme Court of South Dakota affirmed a circuit court order that modified a physician’s alimony obligation, denied the recipient spouse’s motion for contempt after several missed payments, and declined to apply the modification retroactively. The decision provides fresh, concrete guidance to trial courts on two recurrent family-law issues:

• When and how a voluntary income reduction can justify alimony modification, and
• What “ability to comply” means in civil contempt for unpaid alimony.

Most notably, the Court expressly clarified that, in alimony contempt proceedings, a trial court should examine the contemnor’s complete financial condition—including assets, holdings, and the capacity to borrow—not just current income, when assessing ability to pay. The Court also underscored that a good‑faith career change that results in reduced income is not automatically disqualifying for modification.

The parties, Janelle Peery (appellant, former wife) and Curtis Peery (appellee, former husband), divorced in 2019. The decree obligated Curtis to pay $13,500 per month in alimony (after the sale of the marital home), with a scheduled future step-down in later years. In 2023, Curtis relocated to Texas for professional and personal reasons; his income dropped markedly following a move from hospital employment to private practice. After missing payments in mid-2024, he moved to modify alimony; Janelle countered with a motion for contempt. The circuit court reduced alimony to $6,000/month effective January 1, 2025, denied contempt, and declined retroactive application. Both parties sought review.

Summary of the Opinion

The Supreme Court affirmed across the board:

• Alimony modification: No abuse of discretion in reducing alimony from $13,500 to $6,000 per month, effective January 1, 2025. The circuit court’s findings—that Curtis’s income had significantly decreased and that Janelle’s claimed necessities were not credibly supported—were not clearly erroneous.
• Contempt: No clear error in denying contempt; the record supported a finding that Curtis lacked the ability to comply and did not willfully or contumaciously disobey the decree.
• Retroactivity: No abuse of discretion in declining to make the modification retroactive, even though SDCL 25-7-7.3 would have permitted retroactivity from the date notice of hearing was served (July 2, 2024). The trial court reasonably kept the status quo to allow Janelle time to adjust.

Importantly, the Court clarified that trial courts may and should consider accumulated assets and borrowing capacity when assessing “ability to pay” in alimony contempt proceedings (while still affirming the denial of contempt on the record presented).

Analysis

Precedents and Authorities Cited

• Modification standard:
  • Horton v. Horton, 503 N.W.2d 248 (S.D. 1993), and Paradeis v. Paradeis, 461 N.W.2d 135 (S.D. 1990): A change in circumstances is required but need not be “substantial.”
  • Leedom v. Leedom, 2020 S.D. 40, 947 N.W.2d 143: Focus on recipient’s necessities and obligor’s ability to pay; courts must scrutinize both sides—obligors for underemployment and recipients for inflated expenses, including the offsetting effects of cohabitation.
  • Moore v. Moore, 2009 S.D. 16, 763 N.W.2d 536, and Olson v. Olson, 1996 S.D. 90, 552 N.W.2d 396: Modification examines current economics, not whether the original decree was equitable, and is “not to relieve a party of his or her bad bargain.”
  • Haanen v. Haanen, 2009 S.D. 60, 769 N.W.2d 836; Straub v. Straub, 381 N.W.2d 260 (S.D. 1986): Credibility and the distinction between unwillingness and inability to pay.
• Contempt standard:
  • Love’s Travel Stops & Country Stores, Inc. v. City of Wall, 2023 S.D. 68, 1 N.W.3d 664; Taylor v. Taylor, 2019 S.D. 27, 928 N.W.2d 458: Elements of civil contempt and the standard of review.
  • Mundlein v. Mundlein, 2004 S.D. 25, 676 N.W.2d 819; Taecker v. Taecker, 527 N.W.2d 295 (S.D. 1995); Sazama v. State ex rel. Muilenberg, 2007 S.D. 17, 729 N.W.2d 335: Burden to prove inability to comply and the need for a complete and detailed financial statement.
  • Brewer v. Tectum Holdings, Inc., 2025 S.D. 23, 20 N.W.3d 433; Hughes v. Dakota Mill & Grain, Inc., 2021 S.D. 31, 959 N.W.2d 903: Clear-error standard articulation.
• Retroactivity of support modifications:
  • SDCL 25-7-7.3: Forbids retroactive modification of past-due support except from the date notice of hearing is given.
  • Culhane v. Michels, 2000 S.D. 101, 615 N.W.2d 580: SDCL 25-7-7.3 applies to alimony as well as child support.
  • Jopling v. Jopling, 526 N.W.2d 712 (S.D. 1995): Abuse-of-discretion review on retroactivity.
  • Coester v. Waubay Twp., 2018 S.D. 24, 909 N.W.2d 709: Abuse of discretion defined as a choice outside a reasonable range of permissible choices.
• New clarification on contempt “ability to pay” analysis:
  • SDCL 25-7-6.5 (child support assets consideration)—used by analogy.
  • Johnson v. Johnson, 451 N.W.2d 293 (S.D. 1990) (child support contempt): Considering assets and attempts to borrow.
  • Taylor, 2019 S.D. 27: Considering life insurance proceeds in contempt ability-to-pay assessment.
• Special concurrence perspective:
  • SDCL 25-7-1 to -5: Spousal duty to support as the foundation of alimony.
  • Marquardt v. Marquardt, 396 N.W.2d 753 (S.D. 1986); Bauer v. Bauer, 356 N.W.2d 897 (N.D. 1984): Remarriage terminates alimony absent extraordinary circumstances, reinforcing alimony’s nature as a substitute for marital support.

Legal Reasoning

1) Alimony Modification: Change in Circumstances and Credibility Findings

The Court reaffirmed that a party seeking modification must show a change in circumstances since the decree, focusing on the recipient’s necessity and the obligor’s ability to pay. That change need not be “substantial.” Here, the circuit court found:

• Obligor’s ability reduced: Curtis’s income declined markedly after moving to Texas and transitioning from hospital employment to private practice. He provided detailed financial documentation corroborating his testimony.
• Good faith, not evasion: The court credited Curtis’s explanation that he moved for mental health and professional autonomy reasons and sought opportunities he believed could be more lucrative; while the move proved a “bad business decision,” it was not a stratagem to shed alimony (“not trying to get out of a ‘bad bargain’”). He reduced personal expenses, borrowed against a life insurance policy, and drew on a line of credit to stay current as long as possible.
• Recipient’s necessities scrutinized: Janelle’s budget included high discretionary items (e.g., country club dues, entertainment, clothing, and personal care) and expenses attributable to adult children. The court found these were not credible necessities for a household of one adult and one soon-to-be-launched minor. The decree itself indicated she was not required to pay specific expenses for adult children.

Because the circuit court’s factual findings were supported by the record and its credibility assessments were entitled to deference, the Supreme Court held the modification—reducing alimony to $6,000/month effective January 1, 2025, without altering duration—fell within the permissible range of choices and was not an abuse of discretion.

2) Civil Contempt: Ability to Comply and Willfulness

Civil contempt requires: (1) an order, (2) knowledge, (3) ability to comply, and (4) willful or contumacious disobedience. The dispute centered on (3) and (4). The obligor carries the burden to prove inability and must present a complete and detailed financial position statement.

Curtis did so, showing:

• A sharp income fall after the move,
• Significant efforts to borrow and cut his living expenses, and
• That he missed payments only when further compliance became impracticable.

On this record, the circuit court found an inability to comply and a lack of willfulness. The Supreme Court discerned no clear error.

Crucially, the Court added an important clarification: the circuit court mistakenly believed it could not consider assets when determining ability to pay for contempt. The Supreme Court corrected this, instructing that trial courts should consider the contemnor’s complete financial condition—including assets, holdings, and borrowing capacity—when assessing ability to pay in alimony contempt proceedings. This harmonizes alimony contempt with established child support jurisprudence (SDCL 25-7-6.5; Johnson; Taylor). Even so, because the record supported inability to comply, the denial of contempt stood.

3) Retroactivity of Modification: Discretion within SDCL 25-7-7.3

SDCL 25-7-7.3 forbids retroactive reduction of past-due support except for amounts accruing after the date notice of hearing on a modification petition is served on all interested parties. Here, Curtis served notice on July 2, 2024, which meant retroactivity was legally permissible from that date. The circuit court nevertheless chose a prospective effective date (January 1, 2025) to give Janelle time to adjust to reduced support. The Supreme Court held that decision was within the court’s discretion and not arbitrary.

Impact and Practical Implications

A. Doctrinal Clarification: “Ability to Pay” in Alimony Contempt

The Court’s explicit instruction that assets and borrowing capacity are relevant to “ability to comply” in alimony contempt is a meaningful clarification for South Dakota practice. Trial courts should:

• Examine the contemnor’s entire financial picture, including non-wage assets, cash reserves, life insurance cash values, investment accounts, equity in property, and realistic access to credit.
• Require detailed financial disclosures to substantiate claims of inability to comply.

Obligors should expect that simply showing low current income will not suffice if they hold liquid assets or have feasible borrowing capacity. Recipients should be prepared to probe those avenues in discovery and at hearing.

B. Voluntary Income Reductions and Good Faith

The special concurrence situates alimony within the broader duty of spousal support and emphasizes that alimony is not an unbending guarantee of a prior lifestyle. The key question is intent: a voluntary reduction in income undertaken in good faith (e.g., for mental health, professional autonomy, or anticipated long-term viability) may still support modification. Deliberate underemployment to evade alimony remains improper. Trial courts will continue to rely heavily on credibility determinations and documentary corroboration.

C. Recipient’s “Necessities” Versus Lifestyle

Courts will scrutinize claimed budgets and pare away discretionary items and expenses attributable to adult children unless expressly required by decree. This case underscores:

• The distinction between maintaining a lifestyle and demonstrating necessity.
• The need to exclude adult children’s expenses unless the decree clearly includes them.

D. Retroactivity Strategy Under SDCL 25-7-7.3

While SDCL 25-7-7.3 allows retroactivity from the date of notice of hearing, it does not mandate it. Trial courts retain discretion to select an effective date that balances equities. Practitioners should:

• File modification petitions promptly and serve notice of hearing as early as possible to preserve retroactivity options.
• Be prepared to show why retroactivity is equitable in light of both parties’ circumstances.

E. Practice Pointers

• For obligors:
  • Document the reasons for any job change and show it was not a tactic to evade support (e.g., mental health, professional fit, reasonable income projections).
  • Provide a complete financial position statement, including assets and credit lines, and show concrete efforts to meet obligations (expense reductions, borrowing, supplemental work).
  • Move to modify before noncompliance occurs, and serve notice of hearing promptly to preserve potential retroactivity.
• For recipients:
  • Prepare a credible necessity-based budget; separate discretionary spending and adult children’s expenses.
  • Use discovery to identify obligor’s assets and borrowing capacity for contempt arguments.
  • Argue equities against retroactivity where a sudden reduction would be destabilizing.
• For trial courts:
  • Make explicit findings on credibility, necessity, and ability to pay, including assets and borrowing capacity.
  • State clear reasons for any retroactivity determination to facilitate appellate review.

Complex Concepts Simplified

• Abuse of discretion: The appellate court asks whether the trial judge chose an option outside the reasonable range of choices. If the choice is reasonable, even if others might disagree, it stands.
• Clear error: A factual finding is clearly erroneous only if, after reviewing the whole record, the appellate court is firmly convinced a mistake was made. Credibility determinations are particularly deferential.
• Change in circumstances (alimony): A post-decree change affecting either the recipient’s needs or the obligor’s ability to pay. It need not be “substantial,” but it must be real and supported by evidence.
• Civil contempt for support orders: To find contempt, the moving party must prove there was an order, the obligor knew of it, had the ability to comply, and willfully disobeyed it. The obligor can defend by proving inability to comply with detailed financial proof.
• Retroactive modification of support: Past-due support generally cannot be reduced retroactively, except from the date notice of hearing on a modification request is served. Even then, retroactivity is discretionary, not automatic.
• “Bad bargain” versus “bad business decision”: Courts will not modify alimony merely because the original deal later feels unfavorable (“bad bargain”). But a genuine, good‑faith career or business decision that reduces income can be considered in modification, especially when not aimed at evading support.

Conclusion

Peery v. Peery solidifies several important principles in South Dakota family law. First, it clarifies that “ability to pay” in alimony contempt is a holistic inquiry: trial courts should evaluate not just income, but also assets and borrowing capacity. Second, it confirms that voluntary, good-faith changes in employment or business strategy may justify alimony modification when circumstances materially change, provided the obligor’s intent is not to avoid support. Third, it reaffirms that retroactivity of support modification is constrained by SDCL 25-7-7.3 and remains a matter of trial court discretion, even where the statutory preconditions are met.

On the facts, the Supreme Court found no abuse of discretion in reducing Curtis’s monthly alimony to $6,000 effective January 1, 2025, nor clear error in denying contempt. It also upheld the circuit court’s decision to forgo retroactivity to allow Janelle time to adjust. Going forward, Peery will guide parties and courts alike in documenting financial realities, distinguishing necessities from lifestyle choices, and applying a principled, full-picture approach to the enforcement and modification of alimony obligations.