Permission to sell LMC mineral rights could pay $1 million debt to Texas National Bank

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March 12, 2013

Permission to sell LMC mineral rights could pay $1 million debt to Texas National Bank

Ben Tinsley Jacksonville Daily Progress The Jacksonville Daily Progress Tue Mar 12, 2013, 04:19 PM CDT

TYLER — You might call this housecleaning — if your house was the knotted, convoluted, Bermuda Triangle of liens, debts and half-ownerships formerly known as the Lon Morris College bankruptcy estate.

The Texas Attorney General's Office contends that years of erratic spending and borrowing on the part of former LMC President Dr. Miles McCall is directly responsible for this confusion and led to the demise of the estate.

In a hearing scheduled for March 21, Federal bankruptcy Judge Bill Parker is being asked to approve a tentative compromise agreement between what remains of the LMC estate and Texas National Bank — that is expected to rid both parties of liability, and clear remaining legal cobwebs and ownership snarls from LMC's athletic building and certain mineral rights.

As part of this, LMC Plan Agent Dawn Ragan is asking the judge to waive a standard, 14-day bankruptcy stay.

Doing so will will enable her to sell the mineral rights to a group of purchasers that includes James T. McCain, III, Hubert Kidd, Trant Kidd, Stephen E. Calhoun, and others holding minority interests for $1 million, proceeds that will go to satisfy the estate's debt to Texas National Bank, according to paperwork filed in federal bankruptcy court.

According to the tentative agreement, $875,000 of that $1 million will go directly to the bank and $125,000 will be held in escrow.

This is one of the few remaining issues before Parker after the bulk of the LMC bankruptcy proceedings were finalized in early February and Dawn Ragan transitioned titles from Chief Restructuring Officer to the Plan Agent.

It's been known since before the bankruptcy was finalized that that this mineral rights issue would have to be resolved. In early February, Parker formally approved Texas National Bank officials taking possession certain estate property and mineral rights the Lon Morris College bankruptcy estate used as collateral to secure a $2.8 million loan.

At that time, Texas National Bank was given permission to foreclose on the college's athletic building property. But bank officials have since discovered more ownership confusion: One third of the property underneath the building was not under lien by the bank, court records show.

This agreement is designed to eliminate ownership confusion once and for all. The hearing takes place at 1:30 p.m. on March 21.

Among the issues still pending is an unspecified LMC letter of credit held by the Department of Education that cannot be released until an audit of the estate is conducted. As part of this agreement, LMC agrees to pay $25,000 in an escrow account to pay for this audit.

Meanwhile, McCall still faces lawsuits filed filed by the Texas Attorney General's Office and by Sam Houston State University.

As of Tuesday McCall had not filed a formal response to the AG's petition, but he is expected to respond by March 25, said Texas Attorney General Spokesman Thomas Kelley.

“We are not taking any position with respect to the Texas National Bank matter,” Kelley added in an email.

McCall, Ragan, Houston attorney Hugh Ray III, and Texas National Bank attorney Glen E. Patrick did not immediately return requests for comment Tuesday.

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Permission to sell LMC mineral rights could pay $1 million debt to Texas National Bank

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