FILED
NOT FOR PUBLICATION
NOV 07 2016
UNITED STATES COURT OF APPEALS MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
In re: MICHAEL DYLAN HENSHAW; No. 14-15269
KIMBERLY HENSHAW,
D.C. No. 1:13-cv-00388-DKW-
Debtors, KSC
------------------------------ MEMORANDUM*
PHILIP DANIEL HENSHAW;
BARBARA WRESSEL HENSHAW,
Debtors-Appellants,
v.
DANE S. FIELD, Trustee of the
Bankruptcy Estate of Michael Dylan
Henshaw and Kimberly Henshaw,
Trustee-Appellee.
Appeal from the United States District Court
for the District of Hawaii
Derrick Kahala Watson, District Judge, Presiding
Argued and Submitted October 19, 2016
Honolulu, Hawaii
*
This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
Before: WALLACE, FARRIS, and WATFORD, Circuit Judges.
Appellants Philip and Barbara Henshaw (Henshaw Parents) appeal from the
district court’s order affirming the bankruptcy court’s dismissal of their
counterclaim for reformation. We have jurisdiction pursuant to 28 U.S.C.
§ 158(d)(1), and we reverse and remand.
“We review the district court’s decision on appeal from a bankruptcy court
order de novo.” Dreyfuss v. Cory (In re Cloobeck), 788 F.3d 1243, 1245 (9th Cir.
2015). The bankruptcy court’s legal conclusions are reviewed de novo, and its
factual findings are reviewed for clear error. Id. The availability of collateral
estoppel is a mixed question of law and fact that is reviewed de novo. Town of N.
Bonneville v. Callaway, 10 F.3d 1505, 1508 (9th Cir. 1993).
The Henshaw Parents argue that the bankruptcy court incorrectly held that
collateral estoppel bars their counterclaim for reformation. Under federal law,
collateral estoppel is available only when the contested issue is “identical to the
one alleged in the prior litigation.” Trevino v. Gates, 99 F.3d 911, 923 (9th Cir.
1996), quoting Callaway, 10 F.3d at 1508. Four factors are relevant to this
analysis: (1) whether there is “substantial overlap” in the arguments or evidence
advanced in the first and second proceedings; (2) whether new evidence or
argument requires application of a different rule of law; (3) whether the pretrial
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preparation and discovery during the first action could “reasonably be expected to
have embraced the matter sought to be presented in the second”; and (4) how
closely related the claims in the different actions are. Disimone v. Browner, 121
F.3d 1262, 1267 (9th Cir. 1997), quoting Restatement (Second) of Judgments § 27
cmt. c.
None of these factors supports applying collateral estoppel to the Henshaw
Parents’ counterclaim. Applying factor one, in the first action the Henshaw Parents
argued that the deed’s creation of a joint tenancy did not necessarily transfer equal
ownership interests. In their counterclaim, the Henshaw Parents argue that the deed
ought to be reformed because its transfer of equal ownership interests does not
reflect their intent. Furthermore, they will now be able to present the extrinsic
evidence of that intent that the bankruptcy court excluded in the first action. See
Lee v. Aiu, 85 Haw. 19, 31, 936 P.2d 655, 667 (Haw. 1997).
As to the second factor, this new evidence and argument will require
application of a different rule of law: that the deed should be reformed if, through a
mutual mistake of fact, it does not conform to the parties’ intent. See Application of
Mokuleia Ranch & Land Co., Ltd., 59 Haw. 534, 539, 583 P.2d 991, 994 (Haw.
1978).
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As to the third factor, the pretrial preparation and discovery for a claim to
determine the meaning of a deed creating a joint tenancy cannot reasonably be
expected to encompass extrinsic evidence of the parties’ intent because that
evidence is not admissible in such a proceeding. Midkiff v. Castle & Cooke, Inc.,
45 Haw. 409, 421, 368 P.2d 887, 894 (Haw. 1962). The fact that the Henshaw
Parents prepared such evidence for the first action is immaterial because this factor
is based on an objective standard.
Finally, the claims are related in that they seek the same outcome, but they
are premised on completely different issues—the meaning of the deed as written
versus whether the deed’s meaning reflects the parties’ intent.
Consequently, there is no identity of issues between the two proceedings and
therefore the bankruptcy court erred in applying collateral estoppel, and the district
court erred in affirming that decision.
We reverse the judgment of the district court and remand with instructions to
reverse the bankruptcy court’s order dismissing the Henshaw Parents’ reformation
counterclaim.
REVERSED and REMANDED.
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