Judge Approves Appointment of Bankruptcy Trustee, Hears Annuity Plea
WORCESTER, Mass. (AP) _ A federal bankruptcy court judge has approved the appointment of a trustee to run Monarch Capital Corp.
The move Tuesday came one day after the resignation of Monarch President Roger T. Servison, who had taken over the faltering company last fall.
Monarch consented last week to seek protection from its creditors under Chapter 11 of the federal bankruptcy law. State regulators seized control of the Springfield-based firm’s subsidiary, Monarch Life Insurance, in May.
A Monarch lawyer, William F. McCarthy told U.S. Bankruptcy Court Judge James Queenan Monarch executives no longer feel they can play a role in negotiations over the future of Monarch Life.
But, Queenan reserved decision on a request by a lawyer for the parents 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 during Chapter 11 proceedings.
A lawyer for the parents of Norma Waddoups of Dove Creek, Colo., contended she may lose the $7,000 a month annuity payments that are providing 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 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 after 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, with the approval of a state Supreme Court judge, turned management of the company over to Penn Mutual, which is also interested in acquiring Monarch Life, under a deal that gives the Philadelphia company the right of first refusal.
The banks have pressed their case by filing a federal lawsuit, accusing Penn Mutual Life Insurance Co. of fraud and improper influence.
Monarch Life, which has about 250,000 policies, is continuing to make payments on its own annuities and other insurance products.