Preheat oven to 350 F. Spray a 9x13-inch baking dish with non-stick cooking spray!
In a large skillet, melt the butter and saute the chopped yellow onion and diced red peppers for 3 to 4 minutes, or until start to turn translucent. Stir in the cans of soup, the undrained can of diced tomatoes and green chilies, and the shredded chicken. Combine well and remove from heat.
Place a layer of 1/3 of the torn tortillas into the base of the baking dish, add 1/2 of the chicken mixture. Add another 1/3 of the torn tortillas, then the rest of the chicken mixture. Add final 1/3 of the torn tortillas, and then sprinkle the shredded Monterrey Jack and shredded cheddar cheeses on top.
Bake in the preheated oven for 25 to 30 minutes, or until warmed through and cheese has melted on top.
Serve King Ranch Chicken Casserole with side salad!