TYLER — Officials with the Texas Methodist Foundation are attempting to block the resolution of the Lon Morris College bankruptcy auction unless LMC or a federal judge agree to spare $265,000 in charitable endowments.
The motion objecting to LMC's "third amended plan of liquidation" was filed Tuesday in the U.S. Bankruptcy Court for the Eastern District of Texas. It argues that five charitable endowments are still at risk of unlawfully being liquidated to pay LMC's Chapter 11 bankruptcy costs.
"The Texas Methodist Foundation respectfully requests the court enter an order denying confirmation of the debtor's plan unless it is made clear that the Texas Methodist Foundation's rights are left unimpaired and grant such further relief to which it is justly entitled," the motion reads.
The ongoing LMC bankruptcy auction, held in Dallas, continued into its third day Wednesday. Unless this motion halts proceedings, Federal Bankruptcy Judge Bill Parker is expected to consider confirming the results of the auction on Feb. 4.
In a related matter, representatives with the U.S. Department of Justice Office of the United States Trustee filed a motion Wednesday informing the court that an agreement had been reached with Lon Morris to postpone their deadline for any formal objections or comments regarding the liquidation plan until Jan. 31.
The TMF lawsuit, filed Nov. 6, asserts that the funds were created with the intention of furthering educational, charitable and religious endeavors of the Methodist church and "Methodism" and not to be used to pay the college's liquidation costs.
Austin Attorney Kell C. Mercer, one of the lawyers representing the Texas Methodist Foundation in this matter, declined to elaborate on the filing Wednesday.
TMF's general legal challenge is the second to object to the manner in which the college has managed endowments in the wake of bankruptcy.