Morthland College

A building on the Morthland College campus in West Frankfort is seen in October.

WEST FRANKFORT — A recent string of court decisions and tax sales have been added to previously levied fines and liens against Morthland College.

Two civil cases were settled against Morthland businesses last month. According to Judici, Judge Thomas Dinn entered a default decision Nov. 30, siding with Integrated Spine Care when nobody from Morthland College Specialty Physicians appeared in court for the hearing. The judge ordered a payment of $8,456 be made to settle the dispute.

A second, much larger, settlement was reached just three days prior. Similar to the Integrative Spine Care hearing, nobody from the Morthland Institution of Higher Learning appeared in Judge Melissa Morgan’s courtroom to offer a defense. A default judgement in favor of Donnie Hoffard and Dennis Bowers was made and a fee of $80,914.95 is be paid to the plaintiffs.

Brandon Mayberry represented Hoffard and Bowers in the case. He said the dispute came over rent owed to the two after Morthland College attempted to, in the plaintiffs’ eyes, illegally exit a lease signed for a sports complex.

Mayberry said representatives from Morthland College approached his clients about leasing a building to be used as a sports complex for its athletic program. An agreement was reached that Morthland College would sign a lease with the understanding that modifications would be made to the building by the owners to make it more suitable as a sports complex. Mayberry said this meant adding about 20 shower stalls and replacing portions of the flooring — he said the work cost more than $20,000.

Morthland College disbanded its athletics program in May.

Mayberry said the college believed there was a clause in the lease that would have released them early, however, because no one appeared to represent the school, the judge never heard the defense.

As to the damages suffered by his clients, Mayberry said it’s not going to be an easy thing to make the property viable for other customers.

“Nobody in West Frankfort wants a building with 20 showers in it, or all-tile floors,” Mayberry said. “They are going to have to renovate it again because of it."

These court settlements were accompanied by four tax sales of Morthland-owned property as well as a new lot of IRS tax liens filed against both Morthland College and Morthland College Health Services.

According to documents obtained from the Franklin County Clerk’s office Dec. 1, on Nov. 28, tax debt on four parcels of property owned by The Morthland Institution of Higher Learning was sold by Franklin County. The debt was for tax year 2016. This type of sale occurs after county property taxes are left unpaid.

Parcel No. 12-19-315-009 — which, based on County Assessor's maps, appears to be the school’s office on Oak Street in West Frankfort — was sold for $768.97 to Scott Williams of West Frankfort. To redeem the property, $816.66, which includes a $40 County Clerk fee and $7.69 in interest, would have to be paid.

Properties on West Main Street with Parcel Nos. 11-24-426-009, 010 were sold to P & N Properties Inc. in Teutopolis. Based on County Assessor maps, these two lots are located near CVS in West Frankfort. Property parcel ending in 009 was sold for $1,176.94 and could be redeemed for $1,405.25, which includes a $40 Clerk’s fee as well as $188.31 in interest. The parcel ending in 010 was sold for $1,256.81 and would require $1,472.76, including a $40 Clerk’s fee as well as $175.95 in interest, to redeem the property.

Based on County Assessor maps, it would appear the Coleman-Rhoads building on East Main was also affected by the tax sale. Parcel No. 12-19-312-001 was sold for $2,092.28 to Jab Securities Inc. in Waterloo. To redeem the property, $2,153.20 would have to be paid, which includes a $40 Clerk’s fee as well as $20.92 in interest.

The Coleman-Rhoads building was donated to the college in 2014 by Brent Coleman and Steve Rhoads.

When asked about the tax sale on the building he and his former business partner donated, Rhoads, who once served on the college’s board of directors, said he had not heard the news. He had little comment on the tax sale, but said the state he sees the college in is disheartening.

“What’s happening at Morthland College is sad to me and has been a blow to the community,” he said, also stating that he no longer is affiliated with the school.

According to the real estate redemption estimates, the interest will change for each of the four properties on May, 28, 2018. If these debts go unpaid by Nov. 28, 2019, the purchasers could petition the court to take possession of the deeds for their respective properties.

As of noon on Wednesday, no redemptions were recorded in the Franklin County Clerk’s office. A representative from the office said that any payment sent in the mail could potentially have been in the office, but would not yet have been filed.

Adding to this, Morthland Institution of Higher Learning and Morthland College Health Services also had fresh Internal Revenue Service liens filed against them in November.

On Nov. 15, the IRS filed a lien against the institution for the tax period ending March 31 of this year. According to records in the county clerk’s office, the unpaid balance on the lien was $129,261.72. On the same day, the IRS also filed a $399,193.39 lien against MCHS for the same tax period.

This would be the second period of missed taxes for both entities. In April, the IRS filed a $123,120.87 lien against the school and in May, filed a lien $611,303.37 against MCHS.

As of noon on Wednesday, there had been no releases filed for any of the IRS tax liens at the Franklin County Clerk’s office, though again, a representative said payments or releases could have come by mail, but would not yet have been filed. 

It is unclear if the newly-filed liens are in addition to these amounts filed earlier this year, or if the new figures include previous unpaid liens. A certified public accountant at Carlos Tanner’s office in Marion was inclined to believe the new liens to be seperate from those filed earlier this year, because the IRS listed only one tax period on the filing document.

The kind of tax referenced by the recent liens is detailed as a 941. According to irs.gov, this type of tax filing deals with employee taxes withheld by an employer. The CPA with Tanner’s office said the IRS would not hold employees accountable for taxes withheld but not filed by their employers.

The CPA said these liens are a “tool” for the IRS to collect money and that deeds for property listed as owned by affected companies cannot be transferred without satisfying the liens, which muddies the waters for the recent tax sales made the by the county. The accountant said that all comments on the matter were made as general statements as the office had not reviewed Morthland’s particular cases.

Darrell Dunham, partner at The Bankruptcy Advocates in Carbondale and former bankruptcy law professor at Southern Illinois University Carbondale, spoke with The Southern in generalities — he has not reviewed the specifics of the Morthland liens. He said each case is detail-specific, but he was able to provide some general rules of thumb. He said should someone purchase tax debt on a property, there is a chance a tax lien could come with the deed.

“It’s likely to depend on whether the IRS filed its lien prior to the sale,” he said adding that in most cases “the prior filed tax liens will defeat (the) tax sale purchaser.”

Both IRS liens were filed before the tax sale posted.

Dunham said in an email that tax purchasers are typically "legally sophisticated buyers." He said if a lien is attached to a property, they typically try to work something out with a lien holder like the IRS.

A representative from Jab Securities said this is true in their case. The representative said these types of arrangements are usually made prior to petitioning for a deed.

The IRS declined comment for this report, stating that it is not allowed to discuss individual tax records.

Questions were submitted through a media liaison to both college president and founder, Tim Morthland, as well as its executive vice president, Emily Hayes, regarding the fines and levies. The Southern asked why no representation appeared in court on their behalf and if payment plans had been made to pay down outstanding back taxes at both the state and federal levels as well as their court fines. The following statement was returned by a Morthland College representative:

"Dr. Morthland has spent upwards of $5 million of his own money to make his dream of bringing a faith-based college to his hometown, which has been devastated by the collapse of the coal industry, a reality. While mistakes may have been made along the way, we are dismayed that rather than recognize all of the effort that Dr. Morthland has put into trying to revitalize the community, the Southern continues to try to do everything it can to portray Dr. Morthland, his medical practice and the College in a negative light."

In September, Morthland College was notified that the U.S. Department of Education was putting in place an “emergency action,” completely cutting off its eligibility for Title IV student aid dollars and fining the college just over $2 million for an alleged "breach of fiduciary duty."

The college is being investigated by the U.S. Department of Education as well as by the Illinois Board of Higher Education because of the recent emergency action.

isaac.smith@thesouthern.com

618-351-5823

On Twitter: @ismithreports

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Reporter

Isaac Smith is a reporter covering Franklin, Perry and Saline counties.

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