Texas Business Court Decision – August 14, 2026
No. 25-BC01B-0030 Preston Hollow Capital, LLC, et al. v. Truist Bank, etc. (First Division, Judge Whitehill) 2026 Tex. Bus. 59 25-bc01b-0030-preston-hollow-capital-v-truist-bank-2026-tex-bus-59.pdf
Please note, the court previously issued an opinion in this matter on February 3, 2026 – 2026 Tex. Bus. 5. Here is a link to our summary. Texas Business Court Decision – Monday, February 2, 2026 – Dowd Bennett
Texas Trust Code.
Background.
BB&T (now Truist) served as trustee under a Master Indenture and Bond Indenture executed in connection with a 2017 bond offering financing a a senior care facility developed by Senior Care Living VI, LLC. Preston Hollow purchased over $21 million in senior bonds for the project. Beginning in 2019, Preston Hollow learned that Senior Care had defaulted, including failing to pay its general contractor and property taxes, and Preston Hollow directed Truist to send default notices and later to accelerate the debt. Truist appointed successor trustees and resigned in July 2019. Preston Hollow discovered Senior Care had never deposited gross revenues into the required “Blocked Account” and that a Truist representative had approved this deviation from the trust documents. Preston Hollow sued, asserting breach of fiduciary duty, breach of trust, breach of contract, fraudulent transfer, and conspiracy. Truist moved under Rule 166(g) for legal rulings limiting its duties, and the court separately asked the parties to brief whether the Texas Trust Code governed the relationship.
Issues:
- Whether the Bond Documents created an express trust subject to the Texas Trust Code – Held: No;
- If not, what is the scope of Truist’s contractual duties before and after an Event of Default, including whether written notice was required to trigger heightened duties; and
- Whether breach of fiduciary duty and breach of trust must be pled as separate claims – Held: the issue is moot.
Discussion.
- The Trust Code does not apply because the Bond Documents failed to satisfy two independent requirements of an express trust: (1) they did not transfer full legal title from Senior Care to Truist; and (b) they did not manifest an intent to create a fiduciary relationship. Relying on Poole v. Poole, 2019 WL 3952834 (Tex. App.- Amarillo, 2019, no pet.), the court found the documents bore the hallmarks of a security instrument rather than a trust – Senior Care retained possession, maintenance obligations, redemption rights and any sale surplus. See also Taylor v. Brennan, 621 S.W.2d 592 (Tex. 1981); and Perfect Union Lodge No. 10 v. Interfirst Bank of San Antonio, NA, 748 S.W. 2s 218 (Tex. 1988).
- Because the Trust Code’s unwaivable good-faith duty did not apply, the court turned next to contract construction principles from U.S. Polyco, Inc. v. Tex. Cent. Bus Lines Corp, 681 S.W.3d 383 (Tex. 2023), and Inwood Nat’l Bank v. Fagin, 706 S.W. 3d 342 (Tex. 2025). Pre-default, Truist’s duties were limited to those expressly stated, with no duty to monitor Senior Care absent written notice. See James Constr. Grp., LLC v. Westlake Chem Corp., 650 S.W.3d 392 (Tex. 2022). Post-default, Truist owed a heightened “reasonably prudent person” standard, but this standard still required written notice of default under the the Indenture’s “deemed to have knowledge” clause. See Phoenix Light SF Ltd. Bank of New York Mellon, 2017 WL 3973951 (S.D. NY. 2017).
- The pleading issue is moot since the court has dismissed in full the breach of trust claim; breach of trust only exists as a cause of action where the Trust Code governs the relationship in the first place, and since the court has held the Trust Code does not govern the Bond documents, there is no live breach of trust claim.
In summary, Preston Hollow’s breach of trust claim is dismissed with prejudice. The court also grants-in-part Truist’s requests for rulings as follows: Truist had no duty to monitor Senior Care’s compliance with its separate contract obligations absent a written notice of a default event in the form required by the Bond Documents; and Truist had no duty to advise Preston Hollow of Senior Care’s defaults absent a written notice of default in the required form.
This is a lengthy 70-page opinion. This is a high-level summary, and the reader is urged to review the opinion if the issues are of interest.