An East Texas college involved in a months-long bankruptcy battle has even more hurdles in its fight.
Earlier this month, The Texas Methodist Foundation (TMF) filed a suit against Lon Morris College (LMC) wanting to stop the liquidation of approx. $265,000 of endowments made to the college.
According to bankruptcy court documents, the endowments were made to TMF for uses set forth in various wills and trusts. Lon Morris College has requested the funds but TMF has denied the request saying the liquidation "is not consistent with the charitable intent and purpose of the bequest to TMF."
The funds in question are:
- The Faubion Endowment Fund: $102,261.25
- Buel N Kiker and Rhena R Kiker Memorial Fund: $102,906.87
- Herbert E Dishman and Family Trust: $50,444.67
- Donald G and Marjorie L Willis Fund: $4,161.79
- JL 'Bo' Wilson Scholarship Fund: $10,090.23
TMF is asking that all of those funds be declared not property of the former college's bankruptcy estate.
LMC Chief Restructuring Officer Dawn Ragan said in a statement: "The college has been the recipient of many gifts over time, and some of those gifts have been restricted, and some have not. Monetary gifts are generally held at various foundations that manage the investment of those funds, which then remit earnings or other distributions to the College periodically. The debtor has been seeking to obtain unrestricted funds to be used to help pay its debts, in particular the unpaid employee wages as well as unsecured creditors such as local vendors and suppliers."
The Texas Attorney General's Office also filed paperwork in the US Bankruptcy Court in Tyler to delay the upcoming December auction of Lon Morris College's assets.
The OAG said six days notice of the auction "is not reasonable" since the sale would not close until the bankruptcy becomes official, which is expected in February 2013.
"The College will make a determination on postponement of the auction (or not) based on requests from purchasers and the opinion of its auctioneer, AmeriBid," Ragan said. "if the new purchaser is a for-profit entity, then the AG is asking that the fair value of some portion of "deed restricted" real estate be paid to a charity similar to the college - which could reduce the payment to unsecured creditors and former employees."
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