This case involves the scope of authority of an arbitrator hired by the parties to resolve a property tax exemption dispute. Under RSA 72:23, I property taxes may be assessed on municipally-owned land that is leased to private parties. The plaintiff leased land from the City at the municipal airport under a lease that required the plaintiff to pay taxes that are lawfully levied or assessed. From 1991 to 2006 the City assessed taxes only on the improvements made by the plaintiff, not on the land. In 2006 the City sought to assess the land as well, and litigation ensued and was referred to an arbitrator under an arbitration clause in the lease.
The arbitrator agreed with the City that the language of the lease allowed taxation of the land. However, the arbitrator also found that both parties believed the land was not taxable at the time the lease was negotiated, a "mutual mistake." Invoking the equitable doctrine of reformation of contracts, the arbitrator ruled the terms of the lease would be reformed to reflect the parties' understanding in 1991 that the land would not be subject to tax.
On appeal to the Supreme Court the City argued that the arbitrator's role was limited to interpreting the lease itself, but the Court disagreed, noting the quoting a prominent treaties on arbitration:
"'The remedy of reformation to correct a mutual mistake in a contract is well established and had been consistently recognized by arbitrators.' … In the 'limited circumstance' of a mutual mistake, 'an arbitrator may reform the contract to reflect the true intent of the parties.'"