#30884-a-MES
2025 S.D. 67
IN THE SUPREME COURT
OF THE
STATE OF SOUTH DAKOTA
…
SONJA R. KING, Plaintiff and Appellee,
v.
GARY A. KING, Defendant and Appellant.
…
APPEAL FROM THE CIRCUIT COURT OF
THE SECOND JUDICIAL CIRCUIT
LINCOLN COUNTY, SOUTH DAKOTA
…
THE HONORABLE DOUGLAS E. HOFFMAN
Judge
…
MITCHELL A. PETERSON
THOMAS M. FRANKMAN of
Davenport, Evans, Hurwitz &
Smith, LLP
Sioux Falls, South Dakota Attorneys for defendant and
appellant.
RACHEL PREHEIM of
Lockwood & Zahrbock Kool Law Office
Sioux Falls, South Dakota Attorneys for plaintiff and
appellee.
…
CONSIDERED ON BRIEFS
AUGUST 26, 2025
OPINION FILED 11/19/25
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SALTER, Justice
[¶1.] In this divorce action, the husband appeals the circuit court’s decision
to treat his pending lawsuit against his former business partners as a marital asset
subject to valuation and equitable division. We affirm.
Factual and Procedural Background
[¶2.] Sonja and Gary King were married in 2004 and have two minor
children together. At the time of their marriage, the couple lived in Omaha where
Sonja worked full time as a mortgage banker for Wells Fargo while Gary completed
his master’s degree in business administration at Creighton University. After
graduating, Gary accepted a position as a senior underwriter at Mutual of Omaha.
Around that same time, Sonja left Wells Fargo to start her own private mortgage
company and began working independently as a mortgage broker.
[¶3.] Following the birth of their second child, Gary launched his own
insurance agency, Cypress Risk Management, LLC (Cypress), which sold insurance
policies to colleges and universities for their student-athletes. The couple moved to
Sioux Falls in 2013. Gary’s work required significant travel, and Sonja began
scaling back the number of hours she worked, eventually leaving the mortgage
industry entirely to remain at home to care for the couple’s two children.
[¶4.] Gary focused on growing Cypress, which appeared to perform well.
Around 2020, Gary and a group of local investors began several other business
ventures, most of which were unrelated to Cypress. Gary was named president and
managing member of Rushmore Gaming, LLC, which, along with a number of
ancillary limited liability companies, was part of a larger enterprise operated by the
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investment group. Gary undertook these additional roles while continuing to run
Cypress.
[¶5.] Beginning in early 2023, Gary and Cypress came under scrutiny from
customers and state insurance regulators. In January, an insurance carrier
commenced a civil action, alleging Gary failed to remit insurance premiums
entrusted to him. Gary did not respond, resulting in a default judgment against
him for $708,076. Nor did Gary respond to related inquiries from the South Dakota
Division of Insurance, which ultimately led to the revocation of his insurance license
and Cypress’s business entity license. The investment group swiftly severed ties
with Gary, and soon after, the South Dakota Gaming Commission revoked his
gaming license.1
[¶6.] At home, Sonja was unaware of Gary’s legal and business difficulties,
at least initially. She learned the truth and discovered a broader pattern of Gary’s
self-destructive behavior after one of their sons inadvertently discovered
photographs on Gary’s iPad depicting a woman with whom Gary was having an
extramarital affair. Sonja commenced this divorce action in May 2023, alleging
extreme cruelty and adultery or, in the alternative, irreconcilable differences. Sonja
sought, among other things, an equitable division of marital property and debts of
the parties.
1. On February 29, 2024, Gary was indicted by a District of South Dakota grand
jury on sixteen criminal counts, including nine counts of wire fraud, four
counts of money laundering, two counts of bank fraud, and one count of mail
fraud.
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[¶7.] Following the commencement of the divorce action, Gary retained
counsel to explore legal options against his former business partners to recover
money he loaned or advanced to the businesses. Gary paid his law firm a $50,000
retainer using marital funds, and on August 7, 2023, his attorney sent a demand
letter to several attorneys who were apparently representing four individuals
identified as Gary’s former business partners.
[¶8.] The demand letter listed $1,059,000 allegedly owed to Gary under
certain promissory notes and another $1,646,129 for other loans and money
advanced by Gary on behalf of their business entities. All told, the demand letter
sought payment of $3,016,001. Attached to the letter were six pages of charts
detailing the individual loans and amounts advanced. After the demand proved
unsuccessful, Gary—on behalf of himself and three companies, including Cypress—
commenced an action against the individual business partners as well as four
associated limited liability companies.
[¶9.] Meanwhile, the circuit court conducted a three-day court trial in the
couple’s divorce case. At the outset, the court asked the parties about the extent of
the disputed issues. Sonja’s lawyer noted that “[regarding] the assets and
liabilities, essentially everything is in dispute with the exception of” a vacation
home not relevant to this appeal. Counsel for Gary viewed the issues differently
and described the terms of what he claimed to be a verbal agreement relating to the
pending civil action:
[T]hey agreed that Gary would retain all interest in any and all
lawsuits pending and be responsible for satisfying any and all
judgments with the exception that should Gary receive money
from one of the pending lawsuits, Sonja will receive the first
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$25,000, which is one-half of the money spent for the attorney
fee retainer from marital assets to commence the lawsuit.
[¶10.] The parties submitted a joint property exhibit which listed the “$50k
that Sonja gave to Gary for retainer for his lawsuit” as an asset, though, as the
circuit court later noted, the money was already “gone.” The joint property exhibit
did not specifically include Gary’s civil action against his former partners, but it did
list Gary’s interest in each of the limited liability companies that were involved in
the suit, though neither party assigned a value, and the court made a notation next
to the defendant entities that read “lawsuit.”
[¶11.] During her case-in-chief, Sonja testified that she was aware of Gary’s
other business ventures but admitted she “couldn’t keep up with all of them.” As
late as March 2023, Sonja recalled Gary telling her that their net worth “was over
four and a half million dollars.” Despite their personal bank accounts not reflecting
that amount, she trusted Gary because it was her understanding that “all of [their]
marital assets were . . . being invested into [Gary’s] businesses to grow . . . for long-
term financial security and stability.” She also recalled Gary “telling [her] how his
business partners weren’t contributing,” so “[h]e was carrying the weight of
everybody.” But she trusted Gary’s assurances “that we were going to get repaid
. . . for all this money that he was putting in.”
[¶12.] After filing for divorce and finding out that Gary was no longer
involved with the businesses, Sonja “learned . . . that the majority of the money we
had . . . he claims he had invested with businesses and that he was in the process of
filing lawsuits with his business partners to recoup the money that he put into
those businesses.” Sonja testified that Gary subsequently “provided [her] all sorts
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of documentation on loans that he had put into these LLC’s” as a way of showing
her that “he put all of [their] finances . . . into these businesses.”
[¶13.] During Gary’s testimony, he described each of the business entities
listed on the joint property exhibit and stated that some of them were still in
business though he was no longer involved. On redirect examination, he provided
testimony on the alleged agreement regarding the lawsuit that his counsel
referenced at the beginning of trial.
Q: Were you under the impression that there was an agreement
between you and Sonja and the two lawyers here that you were
going to retain all interests in . . . this lawsuit involving your
business, and you were going to pay Sonja . . . $25,000 as half of
the amount for the retainer?
A: That was what was requested and, yes, that’s what we
agreed to.
Q: And as far as the value of the lawsuit, you could get zero?
A: I’m well aware of that, and . . . I’m not certain a couple of
partners could recover.
Q: They could file bankruptcy?
A: Yes.
Q: And you’re going to be spending hundreds of thousands of
dollars trying to figure that out, aren’t you?
A: That in addition to possibly years of litigation.
[¶14.] In his closing argument, Gary’s counsel reiterated his belief that the
parties agreed Sonja was entitled to $25,000 “before we ever got to court.” He
further asserted he “put it in [their] proposed stipulation at the beginning of this
trial, and we agreed . . . that after that, Gary’s on his own with whether he can ever
collect anything from that lawsuit.” In response, Sonja’s counsel again denied the
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existence of any agreement regarding the lawsuit and clarified that the alleged
agreement was simply a part of the “settlement negotiations before trial.” So, in
Sonja’s view, “those decisions [were] up to the court to make.”
[¶15.] The circuit court issued an oral ruling granting Sonja a divorce on the
grounds of extreme cruelty and adultery. Regarding the property division, the court
found the pending civil lawsuit to be marital property, valued it at $350,000, and
assigned it to Gary. In reaching this amount, the court first determined that it had
to be worth at least $50,000 because Gary had already invested $50,000 in marital
funds for a retainer to initiate the litigation. Next, the court added $300,000
because it represented “roughly 10% of what [Gary] is claiming he’s owed.” The
court also rejected Gary’s claims of an agreement to split the retainer, finding that
any such agreement “necessarily [was a] pretrial negotiation strateg[y].”
[¶16.] In its later written findings concerning the valuation of the lawsuit,
the circuit court further explained:
Gary is reckless but also intelligent and shrewd, and
represented by competent counsel. The retainer is essentially
an investment in a potential outcome and the demand is the
best-case scenario for the outcome in the business lawsuit.
Based upon all of the evidence in the case a valuation of Gary’s
cause of action against his former business partners of the
actual money he has invested plus only 10% of his legal demand
is a very conservative and rational valuation for the [c]ourt to
make.
[¶17.] Gary appeals, raising two issues, which we restate as follows:
1. Whether the circuit court abused its discretion when it
classified the lawsuit as marital property.
2. Whether the circuit court clearly erred in its valuation of
the lawsuit.
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Analysis
Classifying the lawsuit as marital property and the alleged stipulation
[¶18.] We review a circuit court’s decision to determine whether property is
marital or non-marital for an abuse of discretion. Anderson v. Anderson, 2015 S.D.
28, ¶ 8,
864 N.W.2d 10, 14. “An abuse of discretion ‘is a fundamental error of
judgment, a choice outside the range of permissible choices, a decision, which, on
full consideration, is arbitrary or unreasonable.’” MacKaben v. MacKaben,
2015
S.D. 86, ¶ 9,
871 N.W.2d 617, 622 (quoting Gartner v. Temple,
2014 S.D. 74, ¶ 7,
855
N.W.2d 846, 850).
[¶19.] “We have described South Dakota, in general terms, as an ‘all property
state,’ which means that ‘all 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 (alterations in original) (quoting Billion v.
Billion,
1996 S.D. 101, ¶ 61,
553 N.W.2d 226, 237). This is an extension, or “an
uncomplicated interpretation,” of SDCL 25-4-44, which states:
When a divorce is granted, the courts may make an equitable
division of the property belonging to either or both, whether the
title to such property is in the name of the husband or the wife.
In making such division of the property, the court shall have
regard for equity and the circumstances of the parties.
Field, 2020 S.D. 51, ¶ 16,
949 N.W.2d at 224 (quoting SDCL 25-4-44).
[¶20.] We consider a number of factors in determining whether to exclude
property from the marital estate, and thus not subject to equitable division. Id.
¶ 18,
949 N.W.2d at 225. “However, the principal rule for analyzing a discrete claim
of separate property provides that ‘[o]nly where one spouse has made no or de
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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.’” Id.
(quoting Novak v. Novak,
2006 S.D. 34, ¶ 5,
713 N.W.2d 551, 552–53).
[¶21.] But, here, Gary does not seek to apply these rules; the only
justification for his argument that his lawsuit should be considered separate
property is a purported stipulation between the parties. This claim, however, is
unsustainable for two reasons.
[¶22.] First, the record does not support the existence of such a stipulation.2
Insofar as we can determine, the issue may have been discussed as part of
settlement negotiations, but there is no evidence these negotiations came to
fruition. Instead, Gary relies mainly on what he claims to be Sonja’s failure to
object to his references to the alleged agreement at trial. But the record does not
support the assertion that Sonja remained silent or otherwise acceded to Gary’s
assertion.
[¶23.] To the contrary, in her first response to the circuit court, Sonja stated
that “essentially everything [was] in dispute” on the joint property exhibit. She
then clarified multiple times that Gary’s purported agreement represented nothing
more than settlement negotiations. Gary asserts that, as a result of her “inaction,”
Sonja “failed to meet her burden in establishing the [lawsuit] as a marital asset,”
but it was Gary who bore the burden to show the lawsuit was nonmarital. See
2. The circuit court did not expressly rule on the existence of an agreement to
designate Gary’s lawsuit as nonmarital property, but the court implicitly
rejected the argument by treating the lawsuit as marital property subject to
equitable division.
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Johnson v. Johnson, 2007 S.D. 56, ¶ 34,
734 N.W.2d 801, 810 (“[T]he burden of
proof to show the property is nonmarital remains with the person making the
claim.” (quoting Parde v. Parde,
602 N.W.2d 657, 662 (Neb. 1999))).
[¶24.] Second, Gary’s stipulation argument falls short for the additional
reason that the purported agreement, as described at trial, seems to address only
the allocation of the lawsuit as an asset to Gary, not its characterization as marital
or separate property—i.e., “Gary would retain all interest in any and all lawsuits
pending . . . .” (Emphasis added.) That is, in fact, exactly what happened; the
circuit court awarded the lawsuit to Gary as an unliquidated asset which the court
discounted for the contingencies of litigation, as noted above.3
The unliquidated lawsuit as marital property
[¶25.] Gary makes a separate argument to support his claim that the lawsuit
should be considered non-marital property by suggesting that an individual spouse’s
pending lawsuit can never be treated as marital property because valuation would
be inherently speculative. However, Gary did not raise this argument to the circuit
court either at trial or in his objection to Sonja’s proposed findings of fact addressing
the court’s valuation of the lawsuit. As a result, we question whether the issue is
3. Gary also argues that the circuit court improperly acted sua sponte to treat
the lawsuit as part of the marital estate because it was not separately listed
on the parties’ joint property exhibit. We cannot accept this claim. Though
the lawsuit was not specifically listed, the companies that are at the center of
it were listed, though neither party placed a value on them. The parties also
discussed the lawsuit in their testimony, and the record contains the demand
letter and complaint. In the end, the court’s statutory authority to “make an
equitable division of the property belonging to either or both” spouses is not
conditioned upon the property being listed in a joint property exhibit. SDCL
25-4-44.
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properly before us, though Sonja has not argued that the argument was waived.
See Dunham v. Sabers, 2022 S.D. 65, ¶ 67 n.9,
981 N.W.2d 620, 643 n.9 (“We have
stated that ‘[a] party may not raise an issue for the first time on appeal . . . .’” (first
alteration in original) (quoting Ellingson v. Ammann,
2013 S.D. 32, ¶ 10,
830
N.W.2d 99, 102)).
[¶26.] But, preserved or not, there is no justification for the categorical rule
Gary suggests. Though individual results in decisions have sometimes held that
certain unliquidated claims cannot be valued, there is no broad rule that
categorically prohibits courts from considering pending legal claims as marital
property in all cases. See Hanify v. Hanify,
526 N.E.2d 1056, 1059 (Mass. 1988)
(“The fact that the pending lawsuits are of uncertain value does not require their
exclusion from the marital estate.”).4
[¶27.] “An unliquidated claim for money damages constitutes a chose in
action.”
Id. (collecting cases and acknowledging that “many jurisdictions hold that
pending lawsuits constitute marital property subject to division on divorce”). And
we have previously described “a chose in action [a]s a form of personal property.”
Fritzel v. Roy Johnson Constr.,
1999 S.D. 59, ¶ 1,
594 N.W.2d 336, 337. From this,
it follows logically that such a claim can be considered personal property that can be
included in a marital estate and subject to equitable division by the circuit court.
Indeed, we have implicitly treated pending or potential legal claims as marital
assets that are subject to equitable division in at least two decisions. See Krage v.
4. The court in Hanify affirmed the division of a pending lawsuit “on an ‘if and
when received’ basis.” 526 N.E.2d at 1059–61. But neither party here has
advocated for this type of a division.
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Krage, 329 N.W.2d 878, 880 n.1 (S.D. 1983) (noting the circuit court “considered a
chose in action for destruction of property by fire” and “awarded any proceeds
therefrom” commensurate with the ratio used for the division of property);
Kappenmann v. Kappenmann,
479 N.W.2d 520, 524–25 (S.D. 1992) (affirming
circuit court’s decision to include wife’s pending claim in the marital estate and
assign value based on a rejected settlement offer).
[¶28.] In the parties’ efforts to develop their arguments, they each focus on
decisions addressing the separate or marital nature of personal injury awards. See,
e.g., Johnson,
2007 S.D. 56, ¶¶ 32–34, 734 N.W.2d at 809–10 (holding that only the
“portions of a personal injury award that . . . diminish the marital estate are”
considered marital property). But Gary’s lawsuit is unlike a personal injury award
that involves separate and discrete types of damages—some economic and some
noneconomic.
[¶29.] Instead, Gary’s action involves more straightforward economic damage
claims seeking reimbursement for money he claims to have personally advanced to
his businesses for travel and operations. The money Gary loaned came from
marital funds, and any recovery would constitute a restoration of those funds.
Without question, the lawsuit is marital property that we would expect to be subject
to equitable division.
[¶30.] The circuit court did not abuse its discretion in its classification of the
lawsuit as marital property under the theory that it cannot be valued. See id. ¶ 31,
734 N.W.2d at 809 (acknowledging “our deferential standard of review obviously
came into play” after discussing cases involving personal injury awards in the
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context of divorce proceedings). The separate issue of the circuit court’s actual
valuation, however, remains.
Valuation of the lawsuit
[¶31.] Acting pursuant to their statutory authority under SDCL 25-4-44 to
make an equitable division of the marital estate, circuit courts are often required to
determine the value of the parties’ marital assets. As triers of fact, circuit courts
are uniquely positioned to determine value, and we review their valuation decisions
for clear error. Dunham, 2022 S.D. 65, ¶ 63,
981 N.W.2d at 642. Under this
deferential standard, we will reverse the circuit court’s valuation “only when a
complete review of the evidence leaves [this] Court with a definite and firm
conviction that a mistake has been made.”
Id. (alteration in original) (quoting
Schieffer v. Schieffer,
2013 S.D. 11, ¶ 15,
826 N.W.2d 627, 633).
[¶32.] Our rules for valuation allow circuit courts considerable flexibility in
reaching their decision. “The circuit court’s valuation of assets does not have to be
exact.”
Id. In addition, “a circuit court is not required to accept either party’s
proposed valuation of an asset.” Conti v. Conti,
2021 S.D. 62, ¶ 26,
967 N.W.2d 10,
16–17 (citation omitted). They must, instead, simply “fall ‘within a reasonable
range of figures,’ based on the evidence presented at trial.”
Id. at 17 (quoting Hill v.
Hill,
2009 S.D. 18, ¶ 14,
763 N.W.2d 818, 823).
[¶33.] Here, Gary asserts that even if pending lawsuits are not categorically
barred from being included in the marital estate, the circuit court’s valuation of his
lawsuit was clearly erroneous because there was “no definitive evidence in the
record that could have appropriately established a present value on the lawsuit.”
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And as a corollary to his earlier stipulation argument, Gary contends that Sonja did
not present evidence to dispute his testimony that she was only entitled to one-half
of the $50,000 retainer and that “he would retain all interest in the lawsuit.” In
Gary’s view, the court’s valuation is a product of “speculative and conjectural
figures.” We disagree.
[¶34.] Sonja introduced the demand letter that Gary had sent to his former
partners seeking reimbursements of more than $3,000,000 in loans and monies he
claimed to have contributed to the businesses. Sonja included charts documenting
the amounts Gary claimed he was owed. The demand letter, as well as the
complaint Sonja also introduced, detailed Gary’s various legal theories of recovery
for additional damages, including punitive damages that Gary sought from his
former partners. Although Gary testified to concerns about collecting on a
judgment, he did not minimize the amounts he claimed his former business
partners owed him, nor did he present any documentary evidence to support his
claim that a judgment could be difficult to collect.
[¶35.] The circuit court correctly recognized that the $50,000 in marital funds
used for a retainer, though listed on the joint property exhibit, was not, itself, an
asset; it had already been used to retain counsel for the lawsuit. Instead, the court
found that Gary “invested $50,000 for a retainer to initiate the litigation,” which
suggested that Gary believed “it’s got to at least be worth the $50,000.” The court
was also keenly aware of the uncertainty associated with the lawsuit and the risk
that Gary would not recover anything, describing the initial demand as “the best-
case scenario for the outcome in the business lawsuit.” Indeed, it was for this exact
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reason that the court deeply discounted the demand to account for the contingencies
of litigation.
[¶36.] And though Gary may be critical of the discount formula the circuit
court applied, it strikes us as incongruent that Gary would suggest that the amount
requested in his thoughtfully drafted, detailed demand letter was speculative. Both
parties testified that the marital funds were being invested back into Gary’s
businesses. And attached to the demand letter was Gary’s own detailed accounting
of the loans and advances to his businesses. These amounts were consistent with
Sonja’s understanding of their net worth prior to Gary’s legal issues and her
understanding that “the majority of the money [they] had” was invested “to get
these businesses up and running.”5
[¶37.] As to the discount itself, the circuit court found the discounted
$350,000 valuation of the lawsuit included the $50,000 retainer plus “roughly 10%
of what Mr. King is claiming he’s owed.” The court described its initial efforts to
account for the risks before explaining the $350,000 valuation was “the most
conservative calculation” it was “logically comfortable with for that business.”
[¶38.] Gary nevertheless maintains that none of the above supported a
present value for the lawsuit and referred to the circuit court’s use of 10% of the
5. Gary finds fault with the fact that the circuit court’s valuation analysis noted
the identity and “excellent reputation” of his law firm and that it does not
“typically take junk litigation.” The same firm represents Gary in this
appeal, and leaving any irony aside, we think the court’s written findings of
fact make clear that it was simply noting that Gary had successfully engaged
“competent counsel” to handle the lawsuit, which seems like a legitimate
consideration. Had Gary not been able to find an attorney to represent him,
that may well have suggested the suit lacked factual or legal support or that
the odds of recovery were too long.
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demand as “an arbitrary figure.” This, however, misunderstands three immutable
facts: (1) valuing any unliquidated legal claim will necessarily involve some degree
of uncertainty, but the rules guiding the broad discretion circuit courts exercise in
their valuation efforts do not require mathematical certainty; (2) absent exceptional
circumstances not present here, a circuit court’s valuation of marital assets should
be made at the time of the divorce; and (3) our review is perceptibly deferential and
with good reason because we are detached from the task of weighing evidence and
undertaking an equitable distribution of the marital estate. See Johnson, 2007 S.D.
56, ¶ 37, 734 N.W.2d at 810–11 (“‘We do not require exactitude in the trial court’s
valuation of assets’ . . . but the value must be within the range of evidence
presented to the court.” (internal citation omitted) (quoting DeVries v. DeVries,
519
N.W.2d 73, 75 (S.D. 1994))).
[¶39.] From our review, it appears the circuit court’s valuation “fall[s] ‘within
a reasonable range of figures,’ based on the evidence presented at trial.” Conti,
2021 S.D. 62, ¶ 26, 967 N.W.2d at 17 (quoting Hill,
2009 S.D. 18, ¶ 14,
763 N.W.2d
at 823). This evidence was sufficient to inform the circuit court about the nature of
the lawsuit and allow it to assess its value.
Conclusion
[¶40.] The circuit court did not abuse its discretion when it treated the
lawsuit as marital property. Contrary to Gary’s assertions on appeal, the record
does not contain a stipulation from the parties agreeing to classify the lawsuit as
separate property. But the record does show that Gary used martial funds to
initiate the lawsuit, and the lawsuit seeks to recover marital funds that Gary had
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loaned to his business ventures. Moreover, the circuit court’s valuation of the
pending lawsuit was not clearly erroneous. The court relied upon the evidence
presented at trial to arrive at a value of the lawsuit that fell “within a reasonable
range of figures.” Id. We therefore affirm the circuit court’s classification and
valuation of the pending lawsuit within its property distribution.
[¶41.] Finally, Sonja has filed a motion pursuant to SDCL 15-26A-87.3
seeking appellate attorney fees. We grant the motion and award attorney fees in
the requested amount of $7,812.50.
[¶42.] JENSEN, Chief Justice, and KERN, DEVANEY, and MYREN,
Justices, concur.
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