Judge Approves Appointment of Bankruptcy Trustee, Hears Annuity Plea
WORCESTER, Mass. (AP) _ A U.S. Bankruptcy Court judge has approved the appointment of a trustee to run Monarch Capital Corp.
Monarch attorney William F. McCarthy told Judge James Queenan at a hearing Tuesday that Monarch executives no longer feel they can play a role in negotiating the future of Monarch Life.
Monarch last week consented to seek Chapter 11 bankruptcy protection. In late May state regulators seized control of the Springfield-based firm’s subsidiary, Monarch Life Insurance.
Monarch Life, which has about 250,000 policies, is continuing to make payments on annuities and other insurance products.
On Tuesday, Queenan reserved decision on a request on behalf of a 24-year- old brain-damaged Colorado woman to require Monarch to continue making annuity payments to 175 holders of policies controlled by the parent company. The policies have a total value of $47 million.
A lawyer for the parents of Norma Waddoups of Dove Creek, Colo., contended she may lose the $7,000-a-month payments that are paying for her care in a nursing home if they are not separated from Monarch Capital’s other assets.
″The courts should be concerned with what’s good, just and equitable,″ said attorney Arnold B. Tschirgi. ″The Waddoups’ annuity should not be considered a corporate asset.″
But a lawyer for 11 banks, who are owed $247 million by Monarch Capital, maintained the Waddoups gained tax advantages by placing their annuity with the parent company, rather than Monarch Life, and now must live with the consequences of a possible bankruptcy distribution.
″The Waddoups chose to be no more than an unsecured creditor,″ said Risa Rosenberg.
The annuities have become entangled in the court battle between Massachusetts insurance regulators and the creditor banks, led by the Chase Manhattan, over control of Monarch Life.
The banks, who gained control of Monarch Life’s stock following a loan default, contend they had a buyer, Private Capital Partners of Purchase, N.Y., for the company before the state stepped in and placed Monarch Life in receivership.
After seizing the company, state insurance regulators turned management of the company over to Penn Mutual Life Insurance Co., which is also interested in acquiring Monarch Life. The deal gives the Philadelphia company the right of first refusal.
The banks have pressed their case by filing a federal lawsuit accusing Penn Mutual of fraud and improper influence.
Meanwhile Monday, Monarch President Roger T. Servison resigned. He had taken over the company last fall.