Texas Business Court Decision – December 19, 2025
No. 25-BC01B-0030 Preston Hollow Capital, LLC, et al. v. Truist Bank, etc. (Division One, Judge Whitehill) 25-bc01b-0030-preston-hollow-capital-v-truist-bank-2025-tex-bus-55.pdf
Punitive Damages/Termination of Trustee Duties. Senior Care Living was created to develop and operate a senior living facility, and it financed the project with bond financing; Truist Bank was the initial trustee under the bond documents; while another entity issued the bonds, Senior Care was the ultimate bond obligor; Truist was to hold funds generated by the project, including all receipts and revenues from Senior Care; Preston Hollow purchased over $21 million in senior bonds for the construction of the facility and obtained a number of rights as bondholder and Noteholder Representative; when it discovered a number of defaults by Senior Care, it directed Truist to send notices to Senior Care to cure them; Senior Care refused to cure the defaults, and Preston Hollow directed Truist to accelerate the bonds and loan, which Truist did; Preston Hollow also made demand on the loan and bonds for payment and collateral pledges, but the guarantor refused to comply. Truist then resigned as trustee, claiming it lacked the capacity to oversee the defaulted bonds and loan; when it resigned, Preston Hollow asked Truist if Senior care had deposited its gross revenues in the accounts as required; Truist revealed Senior Care had not; Preston Hollow later learned Truist has previously approved Senior Care’s deviation from the bond documents requirements requiring deposit of its earnings into designated bank accounts held by Truist. Preston Hollow brought this action, alleging three causes of action against Truist for breach of fiduciary duty, breach of trust, and breach of contract, and seeking damages.
The matter comes before the Court for decision of legal issues under Rule of Civil Procedure 166(g), with the issues being as follows:
(1) Whether the punitive damage waiver in the trust documents between Senior Care and Truist is enforceable despite Trust Code Sections 111.0035 and 114.007. Held, yes, it is. Next, since it is,
(2) does that waiver apply to the claims arising out of the trust indenture and security agreement between the bond issuer and Truist? Held, yes it does.
(3) does the trustee owe beneficiaries continuing fiduciary duties after the trustee resigns and is replaced by a substitute trustee? Yes, the terminated and replaced trustee must protect a former beneficiary’s confidential information the trustee obtained during the trust relationship.
Held: (1) The trust code does not bar a punitive damages waiver as the Trust Code does not reflect a legislative intent to bar punitive damage waivers in agreements between sophisticated parties. Texas permits punitive damage exclusions in trust agreements, and the punitive damages waiver provision in the Master Indenture bars Preston Hollow from recovering punitive damages. The indenture comports with the legislative intent to allow a party to recover compensatory and equitable remedies from certain trustee breaches by making those damages nonwaivable without also making punitive damages nonwaivable. This result comports with both the contract language and the Trust Code.
(2) The Master Indenture’s punitive damage exclusion also applies to to claims based on alleged breaches of the Bond Indenture. While they are separate documents, they are integral parts of a single agreement involving multiple parties, and both contracts reference the same project and financing and were executed at the same time.
(3) Resignation does not relieve a trustee of liability for any claims that accrued before the trustee’s resignation and replacement; while Truist’s trustee contract duties ended when Truist resigned, fiduciary duties are different, including the duty not to disclose or use the principal’s information; thus, Truist has a continuing duty not to use Preston Hollow’s confidential or proprietary information, acquired during Truist’s tenure as trustee, against Preston Hollow.