King v. King: Pending Business Lawsuits as Marital Property in South Dakota Divorce Law

I. Introduction

In King v. King, 2025 S.D. 67, the Supreme Court of South Dakota addressed a question at the intersection of divorce law and business litigation: whether a spouse’s pending civil lawsuit against former business partners, funded with marital monies and seeking reimbursement of those monies, is itself a marital asset subject to equitable division in a divorce.

The case arose from the divorce of Sonja and Gary King, whose marriage and finances were deeply intertwined with Gary’s entrepreneurial ventures. When Gary’s insurance and gaming businesses collapsed amid regulatory scrutiny and civil litigation, he responded by suing his former business partners to recover more than $3 million he claimed to have advanced or loaned to their shared ventures. He paid a $50,000 retainer for this lawsuit from marital funds.

In the divorce proceedings, the circuit court treated Gary’s new lawsuit as a marital asset, valued it at $350,000, and awarded that asset (i.e., the full interest in the lawsuit) to Gary. On appeal, Gary challenged both (1) the classification of the lawsuit as marital property and (2) the court’s valuation method, arguing that an unliquidated, pending lawsuit is too speculative to be divided as property. He also claimed that the parties had effectively stipulated that he alone would own the lawsuit and that Sonja’s interest would be limited to $25,000.

The Supreme Court affirmed. In doing so, it clarified and reinforced several principles of South Dakota marital property law, most notably:

Pending lawsuits—even unliquidated and uncertain—can be marital property if they are a chose in action tied to marital contributions or marital funds.
South Dakota’s “all property state” doctrine reaches such claims, absent a proper showing that the asset is nonmarital.
Courts may assign a present value to an unliquidated lawsuit using reasonable, evidence-based estimation and discounting, without requiring mathematical precision.
Alleged stipulations that would reclassify marital property as nonmarital must be clear and supported by the record; mere settlement negotiations do not suffice.

II. Summary of the Opinion

Parties: Sonja R. King (plaintiff/appellee) and Gary A. King (defendant/appellant).

Procedural posture: Appeal from the Second Judicial Circuit, Lincoln County, after a divorce trial. The circuit court granted Sonja a divorce for extreme cruelty and adultery, and included Gary’s pending civil lawsuit against former business partners as part of the marital estate, valuing it at $350,000 and assigning it to Gary.

A. Holdings

Classification: The circuit court did not abuse its discretion in classifying Gary’s pending lawsuit as marital property.
- South Dakota is an “all property state” under SDCL 25-4-44; virtually all property of either spouse is subject to equitable division.
- An unliquidated claim for money damages is a chose in action, a form of personal property, and may be treated as a marital asset when it is based on marital contributions or funds.
- The record did not establish any binding stipulation to treat the lawsuit as nonmarital.
Valuation: The circuit court did not clearly err in valuing the lawsuit at $350,000.
- The court could reasonably infer a minimum value of $50,000 from the marital funds paid as retainer to initiate the suit.
- It conservatively valued the claim at about 10% of the $3,016,001 demand plus the retainer, to account for litigation and collection risks.
- That valuation fell within a reasonable range supported by the evidence (the detailed demand letter, the claims alleged, and the financial history).
Alleged stipulation: The Court rejected Gary’s argument that the parties stipulated that the lawsuit would be his separate property and that Sonja’s rights were capped at $25,000.
- The supposed agreement appeared only in the context of settlement negotiations and was never reduced to a binding stipulation.
- Even as described, it dealt with allocation of the asset (who would “retain all interest”) rather than its classification as marital or nonmarital.
Appellate fees: The Court granted Sonja’s motion for appellate attorney’s fees under SDCL 15-26A-87.3 in the amount of $7,812.50.

III. Factual and Procedural Background

A. Marriage and Financial Arrangement

Sonja and Gary married in 2004, had two children, and over time constructed a family financial strategy that revolved around Gary’s entrepreneurial ventures. Sonja initially worked as a mortgage banker and later became an independent mortgage broker before eventually leaving the workforce to become a full-time caregiver as Gary’s businesses demanded more of his time.

Gary founded Cypress Risk Management, LLC, an insurance agency providing policies for college and university student-athletes. Later, around 2020, he expanded into other business ventures with a local investment group, becoming president and managing member of Rushmore Gaming, LLC and associated entities. According to Sonja, the couple’s understanding was that marital funds were consistently reinvested into Gary’s businesses to build long-term wealth.

B. Business Collapse and Legal Troubles

Gary’s business empire began to unravel in early 2023. An insurance carrier sued Gary for failing to remit entrusted insurance premiums, obtaining a default judgment of $708,076 when Gary did not respond. Gary also failed to respond to regulatory inquiries, leading to revocation of his insurance license and Cypress’s entity license. The investment group severed ties, and the South Dakota Gaming Commission revoked his gaming license.

Subsequently, Gary faced a federal indictment on multiple counts of fraud and money laundering (not directly adjudicated in this appeal but part of the background the circuit court understood).

C. Breakdown of the Marriage and the New Lawsuit

Sonja discovered Gary’s extramarital affair and learned of his business and legal troubles. She filed for divorce in May 2023, alleging extreme cruelty and adultery, seeking, among other things, an equitable division of marital property and debts.

After the divorce filing, Gary retained a law firm (for a $50,000 retainer funded with marital assets) to pursue claims against his former business partners. On August 7, 2023, his counsel sent a demand letter seeking $3,016,001, comprised of:

$1,059,000 allegedly due under promissory notes; and
$1,646,129 in other loans or advances Gary claimed to have made for the benefit of their business entities.

The demand letter attached six pages of detailed charts itemizing the loans and advances. When the demand failed, Gary, Cypress, and other entities filed a lawsuit against the business partners and associated LLCs.

D. Divorce Trial and Disputed Issues

At the three-day divorce trial, the parties submitted a joint property exhibit listing various assets and liabilities. The exhibit included:

An item labeled “$50k that Sonja gave to Gary for retainer for his lawsuit” (though the money had already been spent on counsel); and
Gary’s membership interests in the LLCs that were the subject of his lawsuit, annotated with “lawsuit,” but without any assigned value.

Sonja’s counsel told the court that essentially all assets and liabilities were in dispute, with minor exceptions. Gary’s counsel, however, claimed that there was an oral agreement: Gary would keep “all interest in any and all lawsuits pending” and be responsible for judgments, with Sonja receiving the first $25,000 in any recovery to reimburse half the retainer.

Sonja repeatedly denied any binding agreement, explaining that such discussions were part of failed settlement negotiations, not a stipulation submitted for court approval.

The circuit court:

Granted Sonja a divorce based on extreme cruelty and adultery.
Found that Gary’s lawsuit against his former partners was marital property.
Valued that marital asset at $350,000.
Assigned the lawsuit (and any recovery or loss) solely to Gary.

IV. Precedents and Doctrinal Context

A. South Dakota as an “All Property State”

The Court anchored its analysis in SDCL 25-4-44 and its own precedent describing South Dakota as an “all property state”:

“[A]ll property of both of the divorcing parties [is] subject to equitable division by the [circuit] court, regardless of title or origin.” (Field v. Field, 2020 S.D. 51, ¶ 16, 949 N.W.2d 221, 224, quoting Billion v. Billion, 1996 S.D. 101, ¶ 61, 553 N.W.2d 226, 237.)

SDCL 25-4-44 itself provides that, when a divorce is granted, the court may make an equitable division of property belonging to either or both spouses, “whether the title to such property is in the name of the husband or the wife,” with due regard for equity and circumstances.

B. Limited Scope for Excluding Nonmarital Property

In Field and Novak v. Novak, 2006 S.D. 34, 713 N.W.2d 551, the Court articulated the central rule governing when property may be set aside as nonmarital:

“[O]nly where one spouse has made no or de minimis contributions to the acquisition or maintenance of an item of property and has no need for support, should a court set it aside as ‘non-marital’ property.” (Field, 2020 S.D. 51, ¶ 18, 949 N.W.2d at 225, quoting Novak.)

Thus, the baseline presumption is inclusion; exclusion is the exception, requiring both minimal contribution and no need for support.

C. Burden of Proof for Nonmarital Claims

The Court reiterated that the spouse claiming an asset is nonmarital bears the burden of proof. Citing Johnson v. Johnson, 2007 S.D. 56, ¶ 34, 734 N.W.2d 801, 810, and adopting language from Parde v. Parde (Nebraska), it held:

“[T]he burden of proof to show the property is nonmarital remains with the person making the claim.”

This allocation of burden is crucial in King, because Gary argued on appeal that Sonja failed to prove that the lawsuit was marital—yet, under established law, he bore the burden to prove it was nonmarital.

D. Choses in Action and Unliquidated Claims as Property

The Court drew on prior South Dakota and persuasive authority to classify Gary’s lawsuit as a property interest:

Hanify v. Hanify, 526 N.E.2d 1056 (Mass. 1988): Recognized that pending lawsuits can be part of the marital estate, even if their value is uncertain. The Massachusetts court had approved an “if and when received” division for certain contingent claims, and, crucially, rejected any categorical requirement that uncertain value excludes an asset from marital property.
Fritzel v. Roy Johnson Construction, 1999 S.D. 59, 594 N.W.2d 336: South Dakota had already defined a chose in action (an unliquidated claim for money damages) as a form of personal property.
Krage v. Krage, 329 N.W.2d 878 (S.D. 1983): The circuit court considered a chose in action for destruction of property by fire and awarded any proceeds consistent with the overall property division; the Supreme Court noted this treatment without criticism.
Kappenmann v. Kappenmann, 479 N.W.2d 520 (S.D. 1992): Affirmed that a wife’s pending legal claim could be included in the marital estate and valued, in that case, with reference to a rejected settlement offer.

Relying on these authorities, the Court concluded that an unliquidated claim for money damages is property, and thus can be part of the marital estate if the underlying economic reality justifies it.

E. Standards of Review

Classification (marital vs. nonmarital): Reviewed for abuse of discretion (Anderson v. Anderson, 2015 S.D. 28, 864 N.W.2d 10; MacKaben v. MacKaben, 2015 S.D. 86, 871 N.W.2d 617; Gartner v. Temple, 2014 S.D. 74, 855 N.W.2d 846). An abuse of discretion is a “fundamental error of judgment” or a decision outside the range of permissible choices.
Valuation of marital assets: Reviewed for clear error (Dunham v. Sabers, 2022 S.D. 65, 981 N.W.2d 620; Schieffer v. Schieffer, 2013 S.D. 11, 826 N.W.2d 627). A valuation stands unless the reviewing court is left with a “definite and firm conviction that a mistake has been made.”

V. The Court’s Legal Reasoning

A. Rejection of the Alleged Stipulation

1. No Stipulation in the Record

Gary’s primary classification argument hinged on an alleged stipulation: he claimed that the parties and their lawyers agreed that he would “retain all interest in any and all lawsuits pending,” that he would shoulder any judgments, and that Sonja’s entitlement was limited to $25,000 (half the retainer).

The Supreme Court found that the record did not support the existence of a binding stipulation:

At the outset of trial, Sonja’s counsel expressly stated that essentially all assets and liabilities were in dispute, except for an unrelated vacation home.
Sonja’s counsel repeatedly characterized any supposed “agreement” about the lawsuit as part of settlement negotiations, not a concluded stipulation presented to the court.
The circuit court itself treated the lawsuit as marital property in its ruling, implicitly rejecting Gary’s claim that there was an agreement removing it from the divisible estate.

The Supreme Court emphasized that silence or failure to object in the way Gary claimed did not establish a binding stipulation, particularly where the transcript showed Sonja repeatedly contesting his characterization.

2. Misconstruing Allocation vs. Classification

Even assuming, purely for argument’s sake, that there was some agreement, the Court noted that what Gary described addressed allocation—which spouse would “retain all interest” in a given asset—not its underlying classification as marital or nonmarital.

The Court stressed:

Even if the parties agreed that Gary would hold 100% of the lawsuit and be responsible for related risks, such an agreement does not necessarily transmute the nature of the asset from marital to separate property.
That, in fact, is what the circuit court did: it treated the lawsuit as a marital asset and then allocated it entirely to Gary, assigning it a discounted value as part of the property division.

Thus, even on Gary’s own version of the facts, he failed to show that any agreement addressed the status of the lawsuit as marital or nonmarital property.

3. Burden of Proof Falls on Gary

Importantly, the Court underscored that Gary, not Sonja, had the burden to prove that the lawsuit was nonmarital. It rejected his argument that Sonja’s supposed failure to object at certain points relieved him of that burden.

Because Gary introduced no competent evidence that the lawsuit was based on separate (nonmarital) funds or that Sonja had no contribution to or need for the underlying asset, his classification challenge failed.

B. Classification of the Pending Lawsuit as Marital Property

1. Categorical Exclusion Rejected

Gary’s second classification argument was broader: he urged a rule that a spouse’s pending, unliquidated lawsuit can never be treated as marital property, because its valuation is inherently speculative.

The Court noted that this argument was not preserved below—Gary did not raise it in the circuit court or in objections to proposed findings—but addressed it anyway, especially as Sonja did not assert waiver.

The Court rejected any categorical bar. It acknowledged that some cases have held specific claims too speculative to value, but emphasized:

There is no general rule that all pending lawsuits must be excluded from the marital estate.
Many jurisdictions, including Massachusetts in Hanify, treat such lawsuits as divisible marital property when appropriate.

2. Lawsuit as Chose in Action and Personal Property

Drawing on Fritzel, the Court reiterated that “[a]n unliquidated claim for money damages constitutes a chose in action” and that a chose in action is a form of personal property.

From there, the logical step followed: if the law recognizes a pending lawsuit as a form of personal property, then within an “all property state” like South Dakota, such property can be a marital asset subject to equitable division, unless properly set aside as nonmarital under the narrow Novak/Field standard.

The Court’s prior decisions in Krage and Kappenmann had already implicitly treated such claims as potential marital assets:

In Krage, a claim for destruction of property was considered and any future proceeds were to be divided according to the property ratio.
In Kappenmann, a pending claim was valued by reference to a rejected settlement offer and included in the estate.

3. Distinguishing Personal Injury Awards

Both parties invoked South Dakota cases involving personal injury awards, especially Johnson v. Johnson, which held that only certain portions of a personal injury settlement (those that “diminish the marital estate,” such as lost wages or medical expenses paid from marital funds) are marital property.

The Court explained that Gary’s lawsuit was fundamentally different from a typical personal-injury case that combines:

Economic damages (e.g., lost earnings, medical expenses), and
Non-economic damages (e.g., pain and suffering, emotional distress, which may be treated as more personal to the injured spouse).

In contrast, Gary’s claims were purely economic and directly traceable to marital funds:

The loans and advances he sought to recover were made from marital resources.
Any recovery would effectively replenish or restore those marital assets that had been diverted into his business ventures.

The Court concluded that “without question, the lawsuit is marital property” under these facts.

C. Valuation of the Pending Lawsuit

1. Evidence Supporting Valuation

The circuit court had before it:

The August 7, 2023 demand letter seeking $3,016,001 in repayments, supported by six pages of detailed charts documenting each loan and advance.
The complaint filed against the business partners and associated LLCs, stating various causes of action and claiming additional relief, including punitive damages.
Testimony from Sonja that Gary had long represented their net worth as over $4.5 million and that he had assured her their marital assets were being invested in his businesses for long-term gain.
Testimony from Gary acknowledging the size of the claims and the fact of the retainer, along with generalized concerns about litigation risk and potential bankruptcy of defendants (but without documentary support for any particular probability of non-collection).

2. The Court’s Discounting Method

The circuit court reasoned as follows:

The $50,000 retainer—funded from marital assets—was “essentially an investment” in the lawsuit. Given Gary’s intelligence, shrewdness, and competent counsel, the court inferred that he would not invest such a sum if he believed the claim had no value. Thus, the court concluded the claim must be worth at least $50,000 on a present-value basis.
Recognizing that the demand of $3,016,001 represented a “best-case scenario,” the court then deeply discounted that figure, adding approximately 10% of the demand ($300,000) to the retainer, for a total valuation of $350,000.

The written findings underscored that this was a “very conservative and rational” valuation in light of the evidence and the risk that the lawsuit might fail or be uncollectible.

3. Responding to the “Speculation” Argument

Gary argued that the valuation was based on “speculative and conjectural figures” because:

The lawsuit was unliquidated and its success uncertain.
No expert testimony or definitive valuation of the lawsuit was offered.
The court’s use of “10%” appeared, in his view, arbitrary.

The Supreme Court responded on several levels:

Inherent uncertainty is tolerated. By its nature, valuing an unliquidated legal claim “will necessarily involve some degree of uncertainty.” Yet South Dakota law does not require mathematical precision in asset valuation; estimates that fall within a reasonable range of the evidence are permissible.
Evidence anchored the valuation. The court did not conjure a value from thin air. It relied on:
- Gary’s own detailed, itemized demand letter;
- The marital funds invested in both the businesses and the retainer; and
- The (unrefuted) representation that the demand letter reflected the amounts Gary genuinely believed he was owed.
Discounting is judicially acceptable. Applying a heavy discount (10% of claimed damages, plus the amount of the retainer) is a rational way to account for litigation risk, collection risk, and delay, especially where no party brought forward a competing valuation methodology.
Deferential review. Under the clear-error standard, the Supreme Court’s role was not to pick a “better” number but to decide whether the circuit court’s valuation left it with a firm conviction of mistake. On this record, it did not.

The Court also noted the irony in Gary characterizing his own demand letter as speculative when he had previously presented those figures to his adversaries as amounts legitimately owed.

4. Within a “Reasonable Range of Figures”

Citing Conti v. Conti, 2021 S.D. 62, 967 N.W.2d 10, and Hill v. Hill, 2009 S.D. 18, 763 N.W.2d 818, the Court reiterated that the circuit court’s valuation need only fall within a “reasonable range of figures” guided by the evidence.

Given the $3 million-plus demand, the detailed documentation, and Gary’s own portrayal of the marital estate as heavily invested in these ventures, a $350,000 valuation was easily within that range.

VI. Complex Concepts Simplified

A. “All Property State”

In some states, only property acquired during marriage is subject to division, and certain categories (like inheritances) are presumptively separate. South Dakota is more expansive:

“All property state” means that every asset owned by either spouse is initially in the pool for possible division—regardless of whose name holds title or when acquired.
The court then decides how to divide it equitably, considering contributions, needs, and circumstances.

B. Chose in Action

A chose in action is a legal term for a personal right to recover money or property by bringing a lawsuit. It covers things like:

A pending lawsuit for breach of contract;
A claim for damages due to a car accident; or
A right to sue a business partner for unpaid contributions.

It is “property” because it can lead to money and can sometimes be sold, assigned, or pledged as collateral.

C. Unliquidated vs. Liquidated Claims

Liquidated claim: The amount is fixed or readily ascertainable (e.g., a promissory note where someone owes you $100,000 plus specified interest).
Unliquidated claim: The final amount is uncertain and must be determined by negotiation, settlement, or judgment (e.g., lawsuit for damages, lost profits, or personal injuries).

King makes clear that unliquidated claims can still be treated and valued as property in a divorce, using reasonable approximations.

D. Abuse of Discretion vs. Clear Error

Abuse of discretion (classification issue): The appellate court asks whether the trial court made a decision that no reasonable judge could have made under the circumstances.
Clear error (valuation issue): The appellate court respects the trial court’s role as fact-finder and overturns its valuation only if, after reviewing the whole record, it is firmly convinced the trial court made a mistake.

E. Equitable Division

Equitable division does not always mean “equal” in a strict 50–50 sense. Instead, the court aims for fairness, taking into account:

The length of the marriage;
The contributions of each spouse (financial and non-financial);
The parties’ ages, health, earning capacities, and needs;
Fault or misconduct, to the extent permitted by state law; and
The nature and liquidity of the assets.

VII. Impact and Practical Significance

A. Clear Confirmation: Pending Lawsuits Can Be Marital Property

King v. King cements the principle that in South Dakota:

Pending business lawsuits—particularly those aimed at recouping marital funds invested in ventures—are part of the marital estate.
Circuit courts may (and likely should) address them explicitly in the property division rather than ignoring them as too uncertain.

This removes any doubt that litigants might have had based on the inherent non-certainty of unliquidated claims.

B. Strategy for Litigants and Counsel

The decision carries several practical lessons:

Include pending claims in property schedules. Parties should list all pending or reasonably anticipated lawsuits (and related rights to sue) in their property disclosures, along with supporting documents such as demand letters, complaints, or settlement offers.
Be prepared to prove value (or lack thereof). A spouse claiming a lawsuit is either worthless or nonmarital must present evidence:
- On the claim’s legal and factual strength;
- On collectability (e.g., defendant insolvency, liens, bankruptcy); and
- On the marital or nonmarital source of the funds at issue.
Your demand letters can be used against you. As King demonstrates, a detailed demand letter may be strong evidence of the magnitude of the claim, and courts may reasonably treat it as a starting point for valuation.
Discounting will be expected. Courts can account for risk by assigning only a fraction of the face-value demand as present value. Parties who disagree should present their own discount analyses rather than just labeling the court’s approach “arbitrary.”

C. Limits on Party Autonomy: Stipulations and Settlement Talks

King also sends a message about the role of party agreements:

Settlement negotiations are not stipulations. Informal or oral understandings discussed in the context of settlement, without clear on-the-record confirmation and court approval, will not automatically control the classification of assets.
Courts retain ultimate responsibility for equitable division. Even if parties wish to allocate a lawsuit entirely to one spouse, the court still must determine whether the interest is marital and how its value fits into a fair division overall.

D. Treatment of Different Types of Claims

While King involves business-related claims for economic loss funded with marital money, its reasoning may extend to other categories of unliquidated claims:

Contract and business tort claims (e.g., unpaid commissions, partnership disputes) are squarely within the scope of marital property when tied to marital efforts or investments.
Personal injury claims remain governed by the nuanced rule in Johnson, with only those components that “diminish the marital estate” treated as marital. King reinforces that the key distinction lies in the type and source of the damages, not simply the fact that a claim is unliquidated.

E. Appellate Attorney Fees

The Court’s award of $7,812.50 to Sonja for appellate attorney fees under SDCL 15-26A-87.3 is another reminder that:

In domestic relations appeals, the prevailing party can recover reasonable attorney fees where authorized by statute and supported by appropriate submissions.
Parties should factor potential fee exposure into strategic decisions about whether and how far to litigate classification and valuation issues on appeal.

VIII. Conclusion

King v. King is a significant, clarifying decision in South Dakota marital property law. It firmly establishes that:

Unliquidated, pending business lawsuits are property, specifically choses in action, and fall within the marital estate in an “all property state” like South Dakota when the claims are based on marital funds and efforts.
Courts have broad discretion to value such claims using evidence-informed estimates and discounting, without being paralyzed by uncertainty.
Parties seeking to carve out assets as nonmarital must carry the burden of proof and cannot rely on vague or unrecorded settlement discussions to reclassify property as separate.

For practitioners, the case underscores the need to:

Identify and disclose all pending and potential claims as part of the property inventory;
Gather concrete documentation (like demand letters, accounting schedules, and pleadings) of those claims;
Be candid about the amounts sought in related litigation, recognizing that those same figures will inform divorce valuations; and
Carefully formalize any stipulations affecting the characterization or allocation of significant assets.

In short, King v. King integrates business litigation rights into the mainstream of South Dakota equitable distribution law, ensuring that substantial economic claims are neither ignored nor shielded from fair division merely because they remain unresolved at the time of divorce.