STATE OF NEW MEXICO COUNTY OF CHAVES FIFTH JUDICIAL DISTRICT COURT NEW MEXICO MILITARY INSTITUTE, Plaintiff, vs.

NMMI ALUMNI ASSOCIATION, INC., a New Mexico non-profit corporation, Defendant. DEFENDANT NMMI ALUMNI ASSOCIATIONS ANSWER TO PLAINTIFFS COMPLAINT FOR RECEIVERSHIP, CONSTRUCTIVE TRUST, MANDATORY INJUNCTION AND ACCOUNTING COMES NOW the Defendant NMMI Alumni Association, Inc., by and through its attorneys of record, Keleher & McLeod, P.A. (Jeffrey A. Dahl, Michael G. Smith, and Julia Maccini), and for its Answer to Plaintiffs Complaint for Receivership, Constructive Trust, Mandatory Injunction and Accounting (the Complaint), states as follows: FIRST DEFENSE Plaintiffs Complaint fails to state a cause of action upon which relief can be granted. I. Introduction Since 1966, the NMMI Alumni Association (hereafter the Association) has maintained the proud and honorable tradition of promoting and assisting the New Mexico Military Institute (hereafter the Institute) through a variety of fund raising endeavors and scholarship opportunities to cadets, as well as reaching out and serving the needs of NMMI alumni throughout the country and liaising affairs between NMMI alumni and the Institute. At all times material hereto, the Association has maintained its status as a private, stand-alone charitable No. D-504-CV-2013-00339

institution pursuant to federal law and IRS regulations.

The Institute alleges throughout its

Complaint that the Association exists solely for the benefit of the Institute. Nothing could be further from the truth, and the Institutes continual insistence on this point demonstrates the desperate need for the Association to remain separate and independent from the Institute. This lawsuit is the culmination of a concerted and wrongful attempt by the Institute to gain governance of the Association and to exercise control over the considerable assets of the Association which the Association uses for the benefit of its Alumni, as well as for funding scholarships for cadets of the Institute. These assets exceed $5 million. The Institute has

engineered a series of events with the goal of changing the Association from a stand-alone 26 U.S.C. 509(a)(2) private charitable organization to a "Supporting Organization" under 26 U.S.C. 509(a)(3), which would allow the Institute access to the Associations funds. When the Association did not accede to these attempts, the Institute banished the Association from its offices on Institute premises and sequestered the Associations database, containing, among other things the financial records and membership lists of the Association, all of which were kept on servers at the Institute, and filed the present lawsuit. Despite the claims of the Institute of financial mismanagement, negligence and malfeasance, the Association has maintained appropriate financial records, has filed all tax returns required, has undergone audits of its accounting procedures, and has otherwise properly managed the corporate affairs of the Association. The allegations of the Plaintiff to the contrary are misinformed and/or a further attempt to create a fiction that would allow the Institute to

conduct a take-over of the Association. Given the above facts, the Institute's Complaint herein fails to state a claim upon which relief may be granted SECOND DEFENSE As to the specific allegations of Plaintiffs Complaint, the Defendant Association states as follows: 1. Defendant denies the allegations set forth in Plaintiffs Introduction (paragraph

I. of Plaintiffs Complaint), in their entirety. II. Parties 1. 2. Defendant admits the allegations in paragraph 1 of the Complaint. Defendant admits the allegations in paragraph 2 of the Complaint. III. Jurisdiction and Venue 3. 4. Defendant admits the allegations in paragraph 3 of the Complaint. While Defendant does not contest the allegations of venue of paragraph 4 of the

Complaint, Defendant is informed and believes that all available judges in Chaves County have recused themselves from this case and that venue now properly lies in Eddy County, New Mexico. Defendant does not contest venue in Eddy County, New Mexico. IV. Statement of Facts A. The Associations Corporate Documents 5. 6. Defendant admits the allegations in paragraph 5. Defendant states that the Associations Articles of Incorporation speak for

themselves. To the extent that any allegation of paragraph 6 of the Complaint is contrary to or 3

incomplete with respect to the actual language of the Associations Articles of Incorporation, Defendant denies such allegations. 7. Defendant states that the Associations By-Laws speak for themselves. To the

extent that any allegation of paragraph 7 of the Complaint is contrary to or incomplete with respect to the actual language of the Associations By-Laws, Defendant denies such allegations. 8. Defendant states that the Association's Articles of Incorporation speak for

themselves. To the extent that any allegation of paragraph 8 of the Complaint is contrary to or incomplete with respect to the actual language of the Association's Articles of Incorporation, Defendant denies such allegations. Defendant further states that the Association has not

dissolved, nor does it plan to dissolve, absent a vote of its entire membership conducted in a full, fair, and complete manner and as provided for by state law. 9. Paragraph 9 of the Complaint is a legal conclusion to which no response is

necessary. To the extent that paragraph 9 requires a response to any factual allegation or otherwise by Defendant, it is denied. Defendant affirmatively states that at all times material hereto, it has been an independent organization, separate and apart from the Institute and that it has never been a "Supporting Organization" as that term is defined by law. Moreover, as has always been the case since its inception, the Association serves and supports alumni of the Institute as its primary purpose and focus. 10. Defendant denies that the Association's sole purpose is to serve as the Institute's

alumni resource. Defendant states that it is a private, stand-alone charitable organization and not

an arm of the Institute. The Association serves and supports alumni of the Institute as its primary purpose and focus. 11. Defendant admits that it solicited funds for the benefit of the Institute and on

behalf of the Institute, as well as for its own scholarships and funding. The remainder of paragraph 11 of the Complaint is a legal conclusion to which no response is necessary. To the extent that paragraph 11 requires a response to any factual allegation or otherwise by Defendant, it is denied. 12. Defendant admits that alumni have made monetary contributions, however the

term "substantial" is imprecise and Defendant cannot admit or deny whether the contributions were "substantial", nor can Defendant divine whether the allegation refers to donations made individually or in the aggregate. Defendant cannot state whether all such contributions were conditionally made as set forth in Plaintiff's allegations and therefore denies that allegation. Defendant affirmatively admits that some contributions are intended for specific purposes, but not all. Defendant denies that all such contributions were made on condition that said

contributions directly benefit NMMI, to the exclusion of the Association. 13. Paragraph 13 of the Complaint is a legal conclusion to which no response is

necessary. To the extent that paragraph 13 requires a response to any factual allegation or otherwise by Defendant, it is denied. B. The Associations Assets 14. Defendant admits that it maintains three separate accounts entitled "Permanently

Restricted", "Temporarily Restricted", and "Unrestricted" but denies the characterization of the 5

accounts set forth by the Plaintiff in paragraph 14 of the Complaint and the sub-paragraphs therein. 15. Defendant does not know what the Plaintiff considers the "majority of the funds"

and therefore denies the allegations in paragraph 15 of the Complaint. Defendant affirmatively states that the alleged restricted funds are to benefit cadets at the Institute through scholarships. 16. Defendant admits that the Association solicits tax deductible as well as non-tax

deductible donations from alumni and friends, and distributes those funds in accordance with the donor's intent, if one is communicated to the Association, in accordance with its position as a stand-alone charitable organization under 26 U.S.C. 509(a)(2). remainder of allegations of paragraph 16 of the Complaint. 17. Defendant is without sufficient information to form a belief as to the allegations The Defendant denies the

of paragraph 17 of the Complaint and therefore denies same. Defendant affirmatively states that number of dues paying members and life members in relationship to the total number of alumni of the Institute is irrelevant with respect to donations made to the Association. 18. C. Defendant denies the allegations in paragraph 18 of the Complaint.

Financial Management of the Association 19. Defendant is without sufficient information to form a belief as to the allegations

in paragraph 19 of the Complaint and therefore denies same. 20. In response to the allegations in paragraph 20, Defendant incorporates its response

to paragraph 19 herein and further denies the allegations in paragraph 20. Defendant states that

the investment account that funds the scholarship fund is and has been managed by Wells Fargo Bank at all times material hereto. 21. Defendant admits the allegations in paragraph 21 of the Complaint. Defendant

affirmatively states that it proactively hired Tardy & Co. to conduct an internal review of its operation toward improving, streamlining and otherwise making its operations more efficient. At all times material, the purpose of retaining Tardy & Co. was to identify areas of improvement in the management of the Association. The Tardy Report was not intended nor should it be

intended to be a formal audit of Association finances. 22. Defendant states that the Tardy Report speaks for itself. To the extent that any

allegation of paragraph 22 of the Complaint is contrary to or incomplete with respect to the actual language of the Tardy Report, Defendant denies such allegations. 23. Defendant states that the Tardy Report speaks for itself. To the extent that any

allegation of paragraph 23 of the Complaint is contrary to or incomplete with respect to the actual language of the Tardy Report, Defendant denies such allegations. Defendant affirmatively states that the language quoted by Plaintiff lacks context and contains opinion to which no response is required. To the extent such language constitutes any factual allegation or otherwise addressed to Defendant, it is denied. 24. Defendant states that the Tardy Report speaks for itself. To the extent that any

allegation of paragraph 24 of the Complaint is contrary to or incomplete with respect to the actual language of the Tardy Report, Defendant denies such allegations.

25.

Defendant states that the Tardy Report speaks for itself. To the extent that any

allegation of paragraph 25 of the Complaint is contrary to or incomplete with respect to the actual language of the Tardy Report, Defendant denies such allegations. Defendant further

objects to the characterization of the language of the report by the Plaintiff as "alarming". 26. Defendant states that the Tardy Report speaks for itself. To the extent that any allegation of paragraph 26 of the Complaint is contrary to or incomplete with respect to the actual language of the Tardy Report, Defendant denies such allegations. Defendant affirmatively states that the language quoted by Plaintiff lacks context, contains opinion and therefore no response is required. To the extent such language is a factual allegation or otherwise directed to Defendant, it is denied. 27. Defendant denies the allegations of Paragraph 27 of the Complaint. The

Plaintiff's reaction to the alleged findings of the Tardy Report is not an allegation directed to the Defendant and is not relevant or material to the issues in the lawsuit. 28. Defendant admits that in July 2010, Mr. Franklin was hired as NMMI athletic

director and therefore resigned his position with the Association. Defendant admits that it then hired Mr. Lee Jones. 29. Defendant admits that MG Jerry Grizzle requested to meet with the Association

and the Foundation in September 2010 but denies the remainder of the allegations of paragraph 29 of the Complaint. 30. Defendant admits the allegations of the first clause of paragraph 30 but denies that

the agreement reached was a response to correct alleged deficiencies regarding financial 8

solvency and compliance. insolvent. 31. 32.

Defendant affirmatively states that it has never been financially

Defendant denies the allegations in paragraph 31 of the Complaint. Defendant admits that Dr Randy Brown resigned as stated in paragraph 32 of the

Complaint, however Defendant is without sufficient knowledge to form a belief as to the basis for his resignation and therefore denies same. 33. Defendant admits that Mr. John Phinizy took over as the Association's Board

President as stated in paragraph 33 of the Complaint, but specifically denies that Mr. Phinizy increased staff in contravention of the Tardy Report. Defendant denies that Mr. Phinizy directed that the management of endowed scholarships be transferred back to the Association. 34. Complaint. Defendant denies that Mr. Jones was terminated as stated in paragraph 34 of the Upon information and belief, Mr. Jones did not want to serve as a full time

employee; therefore his contract was not renewed. Defendant admits that it hired Mr. David Romero. 35. 36. 37. Defendant denies the allegations in paragraph 35 of the Complaint. Defendant admits the allegations in paragraph 36 of the Complaint. Defendant admits that Institute representatives met with Association

representatives. Defendant objects to the use of the phrase "financial discrepancies" and denies the balance of the allegations in paragraph 37 of the Complaint.

38.

Defendant denies the allegations in paragraph 38 of the Complaint. Defendant

affirmatively states that the Association agreed to address management matters but denies claims of mismanagement. 39. Defendant denies the allegations in paragraph 39 of the Complaint. Upon

information and belief, Mr. Romero hired the accounting firm of May-Taylor to handle the accounting of the scholarships, the investment management of which has been and remains under the control of Wells Fargo Bank. 40. 41. 42. Defendant denies the allegations in paragraph 40 of the Complaint. Defendant admits the allegations in paragraph 41 of the Complaint. Defendant is without sufficient information to form a belief as to what Mr. Lowe

"discovered" or did not "discover" and therefore denies the allegations pertaining to that issue in paragraph 42 of the Complaint. Defendant denies the remainder of the allegations of paragraph 42. 43. 44. Defendant denies the allegations in paragraph 43 of the Complaint. Defendant denies the allegations in paragraph 44 of the Complaint. Defendant

affirmatively states that the Foundation, an arm of the Institute, had exercised control over the financials beginning in November of 2011. All information regarding Association accounts was held on the Institute's servers at these relevant times. 45. Defendant admits that it requested and received an extension from the IRS so that

it could timely file its tax return. Defendant affirmatively states that there is nothing improper or wrong in filing for extensions to file tax returns. 10

46.

Defendant admits that May-Taylor prepared a year-end financial state for the

fiscal year ending June 30, 2012, but denies the allegations in paragraph 46 of the Complaint. 47. 48. Defendant denies the allegations in paragraph 47 of the Complaint. Defendant admits that James Lowe and perhaps Jock Brownfield met with the

Foundation and Institute representatives in January of 2013 to develop a budget for the fiscal year 2013. Defendant affirmatively states that the Foundation had the financial information of the Association at all times material. Defendant affirmatively states that it had developed a

budget for fiscal year ending 2013. The 2013-14 fiscal year budget has not been developed. 49. 50. Defendant denies the allegations in paragraph 49 of the Complaint. Defendant admits the allegations in paragraph 50 of the Complaint. Upon

information and belief, during this time frame, James Lowe, Executive Director of the Association, was actively working with the Foundation to resolve these issues. 51. Defendant denies the allegations in paragraph 51 of the Complaint. Defendant

further objects to the phrase "grim financial situation" as it is a characterization of the Defendant and not a factual allegation. 52. Defendant denies the allegations in paragraph 52 of the Complaint. Defendant

affirmatively states that the Institute had determined, even before February 11, 2013, that it would take steps to exercise complete dominion and control over the Association, notwithstanding the Association's long-standing status as a separate and stand-alone entity. D. The Memorandum of Agreement and Its Termination

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53.

Defendant states that NMSA 1978 6-5A-1(B) speaks for itself.

Defendant

affirmatively states that this section is inapplicable to the Association and any duties imposed by the statute do not apply to Defendant. 54. Defendant admits that it entered into a Memorandum of Agreement with Plaintiff Defendant

but denies the remainder of the allegations of paragraph 54 of the Complaint.

affirmatively states that the MOA was drafted by Institute and its Administration and any ambiguities in the document should be resolved in favor of the Defendant. Defendant further states that pursuant to the then existing by-laws of the Association, the telephonic vote on the MOA was required to be ratified by the Board of Directors of the Association at the next regular meeting and it was not so ratified. 55. Defendant states that the MOA speaks for itself. To the extent that any allegation

of paragraph 55 of the Complaint is contrary to or incomplete with respect to the actual language of the MOA, Defendant denies such allegations. 56. Defendant states that the MOA speaks for itself. To the extent that any allegation

of paragraph 56 of the Complaint is contrary to or incomplete with respect to the actual language of the MOA, Defendant denies such allegations. 57. Defendant states that the MOA speaks for itself. To the extent that any allegation

of paragraph 57 of the Complaint is contrary to or incomplete with respect to the actual language of the MOA, Defendant denies such allegations.

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58.

Defendant states that the MOA speaks for itself. To the extent that any allegation

of paragraph 58 of the Complaint is contrary to or incomplete with respect to the actual language of the MOA, Defendant denies such allegations. 59. 60. Defendant denies the allegations in paragraph 59 of the Complaint. Defendant admits that the Institute elected to terminate the relationship between

the Association and the Institution but denies the remainder of the allegations of paragraph 60 of the Complaint. Defendant objects to the phrase "seemingly insurmountable difficulties" and

affirmatively states that it is a characterization of the Plaintiff and not a factual allegation. 61. Defendant states that the MOA speaks for itself. To the extent that any allegation

of paragraph 61 of the Complaint is contrary to or incomplete with respect to the actual language of the MOA, Defendant denies such allegations. 62. Defendant states that the MOA speaks for itself. To the extent that any allegation

of paragraph 62 of the Complaint is contrary to or incomplete with respect to the actual language of the MOA, Defendant denies such allegations. 63. Defendant denies the allegations in paragraph 63 of the Complaint. Defendant

affirmatively states that it was diligently working on the financial matters which form the basis of Plaintiff's Complaint and would have resolved such issues but for the Institute's concerted effort to evict the Association and render it powerless and ineffective. 64. Defendant admits that the Institute delivered a final notice of termination to the

Association on April 22, 2013 but denies the remainder of the allegations contained in paragraph 64 of the Complaint. 13

65. 66.

Defendant admits the allegations in paragraph 65 of the Complaint. Defendant denies the allegations that it ever engaged in a plan to dissolve and

distribute its assets as stated in paragraph 66. Defendant admits that the Institute did continue to provide working space and personnel support to the Association. 67. 68. 69. 70. 71. Defendant denies the allegations in paragraph 67 of the Complaint. Defendant admits the allegations in paragraph 68 of the Complaint. Defendant admits the allegations in paragraph 69 of the Complaint. Defendant admits the allegations in paragraph 70 of the Complaint. Defendant denies the allegations in paragraph 71 of the Complaint. Defendant

also objects to the characterization that the Association's funds are "in jeopardy" as it is a characterization and opinion and not a factual allegation. 72. Paragraph 72 of the Complaint contains a legal conclusion to which no response

is required. To the extent paragraph 72 contains factual allegations or otherwise against the Association, they are denied by Defendant. The Defendant also objects to the use of the term "long term financial mismanagement" as it is a characterization and opinion and not a factual allegation. 73. Defendant admits the allegations in paragraph 73 of the Complaint that the

Institute made demand upon the Association to transfer Association funds to the Foundation, but denies the remainder of the allegations of paragraph 73. 74. Defendant admits the allegations in paragraph 74 of the Complaint.

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75.

Defendant admits the allegations in paragraph 75 of the Complaint. Defendant

affirmatively states that it was under no obligation, legal or otherwise, to respond to the demands of the Institute. 76. Defendant admits that the Association President called a Board of Directors

meeting for May 17, 2013. Defendant denies the remaining allegations in paragraph 76. 77. Defendant denies the allegations in paragraph 77 of the Complaint. Defendant

affirmatively states that while disagreements arose regarding certain items on its agenda, such disagreements are not uncommon and the Board acted on a majority vote of the Directors regarding all items. 78. Defendant admits that a board meeting was called for May 16, 2013. Defendant

denies that the meeting was called in response to the meeting set for May 17, 2013 and denies all further allegations set forth in paragraph 78 of the Complaint. 79. 80. Defendant admits the allegations in paragraph 79 of the Complaint. Defendant admits that four board members attended the meeting on May 17, Defendant

2013. Defendant denies that the remaining members boycotted the meeting.

affirmatively states upon information and belief, several board members informed the President that they were not available to meet on May 17, 2013 at 1:00 p.m. 81. Defendant denies the allegations in paragraph 81 of the Complaint. Defendant

objects to the characterization of "two splintered boards." There was a quorum of the board present at the May 16, 2013 meeting, while there was no quorum established on May 17, 2013. As such, any action taken at the May 17, 2013 board meeting had no legal force or effect. 15

82.

Defendant denies the allegations in paragraph 82 of the Complaint. Defendant

objects to the statement that the funds in the custody of the Association are in "serious question" as it is a characterization and opinion and not a factual allegation. E. The Alliance Agreement 83. 84. Defendant admits the allegations in paragraph 83 of the Complaint. Defendant states the Alliance Agreement speaks for itself. To the extent that any

allegation of paragraph 84 of the Complaint is contrary to or incomplete with respect to the actual language of the Alliance Agreement, Defendant denies such allegations. 85. 86. Defendant admits the allegations in paragraph 85 of the Complaint. Defendant states the Alliance Agreement speaks for itself. To the extent that any

allegation of paragraph 86 of the Complaint is contrary to or incomplete with respect to the actual language of the Alliance Agreement, Defendant denies such allegations. 87. 88. Defendant denies the allegations in paragraph 87 of the Complaint. Defendant states the Alliance Agreement speaks for itself. To the extent that any

allegation of paragraph 88 of the Complaint is contrary to or incomplete with respect to the actual language of the Alliance Agreement, Defendant denies such allegations. 89. Defendant states the Alliance Agreement speaks for itself. To the extent that any

allegation of paragraph 89 of the Complaint is contrary to or incomplete with respect to the actual language of the Alliance Agreement, Defendant denies such allegations.

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90.

Defendant states the Alliance Agreement speaks for itself. To the extent that any

allegation of paragraph 90 of the Complaint is contrary to or incomplete with respect to the actual language of the Alliance Agreement, Defendant denies such allegations. 91. Defendant admits the allegations in paragraph 91 of the Complaint. The

Association believes, upon information and belief, that Jock Brownfield was charged with preparation of the budget and had failed to do so. Since that time, the Association has been denied access to financial records by the Institute which would allow it to develop a budget and any failure to develop a budget is the direct result of the actions of the Institute. Defendant affirmatively states that it had arranged for an accounting firm to develop a budget for 2013 but was unable to execute a proposed development since the Institute evicted the Association from its offices and denied the Association access to its database on Institute servers. . 92. 93. Defendant denies the allegations in paragraph 92 of the Complaint. Defendant admits that the Institute terminated the Alliance Agreement but denies

the remainder of the allegations of paragraph 93 of the Complaint. 94. is required. Paragraph 94 of the Complaint contains a legal conclusion to which no response To the extent a response is required to any factual allegations or otherwise by

Defendant, it is denied. 95. Paragraph 95 of the Complaint appears to be a prayer to the court for relief for

which no answer is required. To the extent a response is required to any factual allegations or otherwise by Defendant, it is denied.

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V. Causes of Action A. Claims for Receivership 96. Defendant incorporates by reference its response to paragraphs 1-95 of Plaintiff's

Complaint as though fully set forth herein. 97. Paragraph 97 of the Complaint appears to be a prayer to the court for relief, and as

such no response is required. To the extent a response is required to any factual allegation or otherwise by Defendant, it is denied. appointment of a receiver. 98. NMSA 1978 44-8-3 is a definitional statute and speaks for itself. Defendant Defendant affirmatively states that it objects to the

affirmatively states that said statute provides no guidance for the determination of what funds may be properly placed in a receivership estate. Defendant further states that no receivership estate is justified or mandated in this case. 99. Defendant admits that the Alumni Association's accounts are held and managed

by Wells Fargo Bank. 100. Defendant denies the allegations in paragraph 100 of the Complaint and objects to

the legal characterization that the Association is an agent for, on behalf of and for the benefit of the Institute. 101. Defendant denies the allegations of paragraph 102 of the Complaint. Defendant

affirmatively states that no receivership is justified or mandated in this case.

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102. required.

Paragraph 102 of the Complaint is a legal conclusion and therefore no response is To the extent a response is required to any factual allegation or otherwise by

Defendant, it denies same. 103. B. Defendant asks that the Court deny Plaintiff's request for a receiver.

Constructive Trust 104. Defendant incorporates its response the allegations in paragraphs 1-103 of

Plaintiff's Complaint as if fully set forth herein. 105. Defendant asks that the court deny Plaintiff's request for a constructive trust over

any Association funds. Defendant further objects to the Institutes continual characterization of the Association as existing solely to benefit the Institute and denies such allegations. 106. Defendant denies the allegations in paragraph 106 of the Complaint. Defendant

further states that this allegation is vague and seeks opinion rather than factual information. 107. Defendant denies the allegations in paragraph 107 of the Complaint. Defendant

further objects to the Institutes continual characterization of the Association as existing solely to benefit the Institute and denies such allegations. 108. Paragraph 108 of the Complaint is a legal conclusion which requires no response

from the Defendant. To the extent a response is required to any factual allegations or otherwise, Defendant denies same. Defendant further objects to the characterization that the Association is "retaining " any funds and denies same.

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109.

Defendant denies the allegations in paragraph 109 of the Complaint. Defendant

further objects to the Institutes continual characterization of the Association as existing solely to benefit the Institute and denies such allegations. 110. Paragraph 110 of the Complaint is a legal conclusion which requires no response

from the Defendant. To the extent a response is required to any factual allegations or otherwise, Defendant denies same. 111. 112. Defendant denies the allegations in paragraph 111 of the Complaint. Paragraph 112 of the Complaint appears to be a prayer for relief which requires Defendant affirmatively states that a constructive trust is not

no response from Defendant.

warranted herein and respectfully asks that the Court deny such relief. C. Claim for Mandatory Injunction 113. Defendant incorporates its response to the allegations in paragraphs 1-112 of

Plaintiff's Complaint as if fully set forth herein. 114. Paragraph 114 of the Complaint appears to be a prayer for relief which requires

no response from Defendant. To the extent a response is required to any factual allegations or otherwise, Defendant denies same. 115. Defendant denies the allegations in paragraph 115 of the Complaint. Defendant

also is unclear about Plaintiff's description of "the Board" and "one Board". Defendant also objects to the allegation that the Association cannot manages its own affairs as opinion and not a factual allegation.

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116. Defendant.

Paragraph 116 appears to be a prayer for relief which requires no response from Defendant affirmatively states that an injunction is not warranted herein and

respectfully requests that the Court deny such relief. D. Claim for an Accounting 117. Defendant incorporates its response to the allegations in paragraphs 1-116 of

Plaintiff's Complaint as if fully set forth herein. 118. Defendant denies the allegations in paragraph 118 of the Complaint. Defendant

further denies and objects to Plaintiffs characterization of the Association as an "arm" of the Institute. Defendant is a private charity, organized as a 509(a)(2) corporation, independent and apart from the Institute. 119. Defendant admits that is has solicited and received funds from third parties but

denies the remainder of the allegations in paragraph 119 of the Complaint. 120. Paragraph 120 of the Complaint appears to state a legal conclusion to which no

response is required. To the extent a response is required to any factual allegations or otherwise by Defendant, the same are hereby denied. 121. Paragraph 121 of the Complaint appears to state a legal conclusion to which no To the extent paragraph 121 contains factual allegations against the

response is required.

Defendant, same are hereby denied. AFFIRMATIVE DEFENSES As separate and alternative affirmative defenses, Defendant raises the following;

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1,

No agency relationship now exists or has ever existed between Plaintiff and

Defendant as a matter of law due to the legal structure of the Defendant. 2. No agency relationship now exists or has ever existed between Plaintiff and

Defendant as a matter of fact due to failure and/or lack of consideration. 3. Any contractual relationship between Plaintiff and Defendant has been voided due

to failure and/or lack of consideration on the part of the Plaintiff. 4. 5. barred. 6. 7. Defendant is entitled to rely on its legal status as a private charitable organization. To the extent Plaintiff alleges any negligence on the part of Defendant, Defendant Plaintiff's claims for equitable relief are barred by the doctrine of unclean hands. Plaintiff stands in pari delicto, and as such, its claims for equitable relief are

denies such negligence and states that Plaintiff's claims are barred by the doctrine of pure comparative fault. 8. Plaintiff has not suffered any damage or injury, factually or legally, as a result of

any alleged acts or failure to act by Defendant. 9. hereto. Defendant affirmatively states that it acted in good faith at all material times To the extent Plaintiff alleges a lack of good faith on the part of the Defendant,

Defendant states that there is no duty of good faith, express or implied, owed from Defendant to Plaintiff.

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10.

Plaintiff has failed to show that it has suffered any irreparable damage or that it

will materially prevail at any trial on the merits in this matter and its claims for injunctive relief are therefore barred. 11. 12. 13. 14. Plaintiff's claims are barred by the doctrine of waiver. Plaintiff's claims are barred by the doctrines of legal and equitable estoppel. Plaintiff's claims are barred by the doctrine of laches. Plaintiff's claims are barred by its failure to mitigate any alleged damages herein,

which damages are denied by Defendant. 15. 16. Defendant owes no fiduciary duty to the Plaintiff. Plaintiff's claims arising from the Memorandum of Agreement referenced in its

Complaint are barred as the Memorandum of Agreement was void or voidable. 17. Defendant reserves the right to assert such additional affirmative defenses as may

be available or discovered during the course of this matter. CONCLUSION WHEREFORE Defendant, having fully answered Plaintiff's Complaint, respectfully requests that this court deny Plaintiff's Complaint and dismiss each cause of action with prejudice, and for such other and further relief as the Court deems just and necessary.

Respectfully submitted, KELEHER & McLEOD, P.A. Electronically filed on 07/31/2013 By: /s/ Jeffrey A. Dahl Jeffrey A. Dahl 23

Michael G. Smith Julia Maccini P.O. Box AA Albuquerque, NM 87103 (505) 346-4646 telephone Attorneys for Defendant I hereby certify that on July 31, 2013, I filed the foregoing electronically through the Odyssey File & Serve System, which caused all parties or counsel to be served by electronic means; and a true and correct copy of the foregoing was mailed to all counsel of record as follows:
Richard E. Olson, Esq. Parker B. Folse, Esq. HINKLE, HENSLEY, SHANOR & MARTIN, LLP P.O. Box 10 Roswell, NM 88203 rolson@hinklelawrm.com pfolse@hinklelawrm.com Attorney for Plaintiff

/s/ Jeffrey A. Dahl JEFFREY A. DAHL

00193451 / 012973-001

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