Jacksonville Daily Progress
When did the financial spiral begin for Lon Morris College?
Perhaps it was Dec. 29 2011, when LMC spent over $6 million — in the form of a wraparound real estate lien note — to secure several Jacksonville city property lots to use as a dormitory.
Or it could have been Feb. 1, when Lon Morris officials effectively borrowed $2.8 million from Texas National Bank, using as collateral the oil, gas mineral and royalty rights from college-owned property in DeSoto Parish, La.; Lafayette County, Ark.; Lea County, New Mexico and the Texas counties of Shelby, Panola, Marion, Freestone, Upshur, Harrison, Grayson and Titus.
Whatever the exact cause, there is no denying that by August, Lon Morris was bankrupt and closed. The accounts of how debt accumulated come from a lawsuit Texas National Bank has filed against LMC's estate in United States Bankruptcy Court Eastern District of Texas in Tyler.
Tomorrow, officials with Texas National Bank will continue their attempts to remove an "automatic stay" injunction imposed by the court that prevents them from claiming what they are owed by the college.
Dawn Ragan, chief restructuring officer for the Lon Morris bankruptcy estate, is one of seven witnesses planned for the 9:30 a.m. hearing at the federal bankruptcy court in Tyler. It is one of several Lon Morris bankruptcy-related hearings that takes place in this court Wednesday morning.
Texas National Bank officials argue that any stay should be terminated because, among other things, Lon Morris has failed to properly maintain its collateralized property.
College officials “allowed the water heaters to freeze, break and flood the building destroying the water heaters and causing water damage," the bank's petition reads. "Debtors failure to properly maintain and preserve the bank's collateral is cause to terminate the stay."
This property is not listed specifically by name in the lawsuit, but is referred to as if it were "the Tilley property" also mentioned in the petition.
This is corraborated somewhat by Tilley LLC representative Owen Seamands, who explained Tuesday the transaction between his company and Lon Morris revolved around a dormitory titled "The Lodge."
"We built the dorm for them," Seamands said. "The lots are still right over there on Sunset and Tilley."
Despite the property being named in the lawsuit, Seamands contends the property is not currently tied up in the bankruptcy proceedings.
"It's quite complicated, but we foreclosed and were able to get it back," he said. "We're no longer part of the bankruptcy any more or the auction; it's really a non-event."