Atrium, Cannon trust settlement selects local beneficiaries (2024)

A proposed legal settlement involving Atrium Health and the trust for an heir to the Cannon Mills Co. textile fortune has its Wake Forest Baptist Medical Center affiliate being designated as a beneficiary.

Also sharing in a potential 50% beneficiary distribution is Wake Forest University Health Sciences.

The motion to approve the settlement agreement, filed July 8 with the N.C. Business Court, does not disclose other potential beneficiaries. The trust fund amount has not been listed in any Business Court filings since the trustees submitted their petition Feb. 7.

A hearing on the settlement and final consent order has been set for 10 a.m. Aug. 8 at the Business Court location at 1965 Wake Forest Road, Room 3205, in Winston-Salem.

The Cannon family made its fortune from making towels and bedsheets during the late 1800s in Kannapolis. The company was sold to billionaire David Murdock in 1982.

The Wake Forest entities were selected due to their not-for-profit status — a key qualification given the terms of the 1965 will for Ruth Coltrane Cannon. Her will created a trust for her son, Charles A. Cannon III.

The trustees’ petition requested that Judge Michael Robinson declare Atrium should not be the beneficiary. The trustees claim the not-for-profit does not meet the will’s criteria for a charitable organization.

After nearly five months of often-accusatory back-and-forth claims, Atrium and the trustees have agreed that the terms of the will have made “administration ... become impracticable and impossible to achieve ... as reflected in the differing contentions and arguments of the parties and the record before the court.”

They agreed the solution would be to amend the will, saying in the motion that modification “is necessary and appropriate, and such modification is consistent with Ms. Cannon’s charitable purposes.”

The Wake Forest healthcare groups would be listed as the next-in-line beneficiaries following the deaths of Cannon’s other three children — which have occurred.

The motion cited there is no objection to the settlement from state Attorney General Josh Stein, who is involved because the Cannon Trust petition involves a charitable trust.

Truist Financial Corp. is listed as a petitioner in its role of holding the trust.

The groups have said their agreement “resolves all claims and counterclaims in this action with prejudice with no award of costs or fees to any party.”

With prejudice signifies the complaints are not eligible to be refiled.

Background

The will of Ruth Coltrane Cannon was designed to provide Charles A. Cannon III with trust payments for the rest of his life.

Two of the three trustees are Craig and Kathleen Cannon, who are Charles Cannon III’s son and daughter-in-law. They live in Forsyth County.

The trust laid out the eligibility criteria to receive payments following Charles Cannon III’s death, which occurred in October.

Cabarrus Memorial Hospital, a public hospital owned by Cabarrus County, was the only named entity.

In 1988, the General Assembly terminated its status as a public hospital, but it continued to stay in business.

Atrium claims it is the rightful beneficiary through its ownership of NorthEast Medical Center, a legal successor to the Cabarrus hospital that Atrium acquired in 2007.

The trust said if Cabarrus Memorial Hospital went out of business, the payments were to go to a community beneficiary “for such religious, charitable, scientific, literary or educational purposes as the trustees may time to time select.”

The trustees claim the hospital, as defined in the trust, “no longer existed as a matter of law” and could no longer be considered as the next trust beneficiary.

The amended will has the two Wake Forest healthcare entities qualifying under that criteria.

The dispute

Atrium is overseen by the Charlotte-Mecklenburg Hospital Authority, which is exempt by state law from federal income taxation as a political subdivision of the state.

The trustees argue that Atrium does not qualify as an eligible charitable organization as defined in the language of the trust, citing in part its merger with Advocate Aurora to form the nation’s third-largest healthcare system.

Atrium has said it believes it meets the charitable qualification because it said it “is the largest provider of community benefit in the state.”

The trustees filed the petition “to eliminate any uncertainty regarding the proper distribution of the trust income” to the correct beneficiaries. The trustees also said Atrium indicated it would begin legal actions if the trust didn’t start giving it the money.

Atrium filed March 11 for the dismissal of the trustee’s petition, saying “we believe the law is clear on this matter.”