Philip Henshaw v. Dane Field, 670 F. App'x 594

Philip and Barbara Henshaw (the Henshaw Parents) filed a counterclaim for reformation of a deed in bankruptcy court; the court dismissed the counterclaim and the district court affirmed.
The Henshaw Parents contend the deed’s equal ownership language does not reflect the parties’ intent and seek reformation based on mutual mistake.
The bankruptcy court applied collateral estoppel based on an earlier action that addressed the deed’s meaning as written and excluded extrinsic evidence of intent.
The key legal question is whether issues decided in the prior litigation are identical to those in the reformation counterclaim, such that collateral estoppel applies.
The Ninth Circuit panel reviewed de novo whether collateral estoppel barred the reformation claim and considered four Disimone factors assessing identity of issues.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether collateral estoppel bars the Henshaws’ reformation counterclaim	Collateral estoppel does not apply because the reformation claim involves the parties’ intent and extrinsic evidence excluded previously	Prior adjudication of the deed’s meaning precludes relitigation of issues about the deed	Reversed: collateral estoppel does not bar the reformation claim
Whether the issues are identical between the prior action and the reformation claim	The prior action decided the deed’s meaning as written, not whether it reflected mutual intent	The outcome sought is the same, so issues are effectively identical	Held they are not identical; different legal question and evidence are implicated
Whether new evidence or different law applies to the reformation claim	Reformation requires consideration of extrinsic evidence and mutual mistake law	Prior ruling should bind subsequent litigation regardless of evidence type	Held new evidence (extrinsic intent evidence) and different legal rule (reformation for mutual mistake) apply
Whether prior discovery and pretrial preparation reasonably encompassed the reformation claim	Prior discovery could not reasonably have included inadmissible extrinsic intent evidence	Prior litigation opportunity sufficed to preclude relitigation	Held pretrial discovery in the first action objectively could not have embraced the reformation claim

Dreyfuss v. Cory (In re Cloobeck), 788 F.3d 1243 (9th Cir. 2015) (standard of review for appeals from bankruptcy court)
Town of N. Bonneville v. Callaway, 10 F.3d 1505 (9th Cir. 1993) (collateral estoppel requires identity of issues)
Trevino v. Gates, 99 F.3d 911 (9th Cir. 1996) (federal collateral estoppel requires identical contested issues)
Disimone v. Browner, 121 F.3d 1262 (9th Cir. 1997) (four-factor test for issue identity and collateral estoppel)
Lee v. Aiu, 936 P.2d 655 (Haw. 1997) (admissibility of extrinsic evidence regarding intent)
Application of Mokuleia Ranch & Land Co., Ltd., 583 P.2d 991 (Haw. 1978) (reformation available for mutual mistake)
Midkiff v. Castle & Cooke, Inc., 368 P.2d 887 (Haw. 1962) (extrinsic evidence not admissible to interpret certain deeds)