Preston Hollow Capital v. Truist Bank

2025 Tex. Bus. 55

The Business Court of Texas,
1st Division

PRESTON HOLLOW CAPITAL, §
LLC; and PHCC LLC, Plaintiffs §
§
v. § Cause No. 25-BC01B-0030
§
TRUIST BANK FORMERLY §
KNOWN AS BRANCH BANK & §
TRUST, Defendants §
═══════════════════════════════════════
OPINION REGARDING PUNITIVE DAMAGES
AND TERMINATED TRUSTEE’S DUTIES

═══════════════════════════════════════

Syllabus 1

This opinion addresses (i) whether the Property (Trust) Code bars a trustee from
enforcing a punitive damages waiver; (ii) if not, whether the waiver in one bond
financing contract applies to claims based on a related contract in the same

1
This syllabus is for the reader’s convenience; it is not part of the court’s opinion; and it is not
legal authority.
financing; and (iii) whether a trustee owes continuing fiduciary duties to its
beneficiaries once the trustee resigns and is replaced by a substitute trustee.

The court concludes that (i) the punitive damages waiver is enforceable here
because the Trust Code does not reflect a legislative intent to bar such waivers;
(ii) the subject waiver applies to both contracts because they are integral parts of
the same financing arrangement; and (iii) a terminated and replaced trustee
must protect a former beneficiary’s confidential information that the trustee
obtained during the trust relationship.

Opinion

[¶ 1] The parties submitted these legal issues for decision using Rule of

Civil Procedure 166(g): 2

(i) Whether the punitive damages waiver in the Master Trust Indenture,

Deed of Trust and Security Agreement (Master Indenture) between Senior

Care Living VI, LLC and Branch Bank & Trust Company (n/k/a Truist Bank)

is enforceable despite Trust Code §§ 111.0035 and 114.007; 3 if so,

(ii) does that waiver also apply to claims arising under the Trust

Indenture and Security Agreement between Woodloch Health Facilities

2
See the parties’ Joint Identification of Early Legal Issues.
3
For this opinion, the court assumes that the Texas Property Code, Title 9 (Trust Code),
applies to these issues because the parties asked the court to make that assumption. At the
December 2, 2025, hearing, Truist suggested that the Trust Code might not apply because
the financing arrangement is akin to an exempt deed of trust arrangement. The court invites
the parties to present a briefing schedule to address that issue.

OPINION REGARDING PUNITIVE DAMAGES AND TERMINATION OF TRUSTEE DUTIES, Page 2
Development Corporation and Truist (Bond Indenture), which those parties

executed in connection with the Master Indenture;4 and

(iii) does a trustee owe beneficiaries continuing fiduciary duties after the

trustee resigns and is replaced by a substitute trustee. 5

[¶ 2] Based on plaintiffs’ (Preston Hollow’s) live pleadings, the parties’

submissions, their arguments, and the applicable law, the court issued its

December 17, 2025, Order concluding that § 114.007 does not bar the Master

Indenture’s punitive damages waiver, which applies to claims under both

contracts.

[¶ 3] By order dated December 9, 2025, the court limited the scope of

discovery for Preston Hollow’s post-termination and replacement claims that

Truist used Preston Hollow’s confidential information against Preston Hollow

that Truist gained while serving as the bond agreement’s trustee.

4
The parties are familiar with the contracts at issue, so this opinion need not further define
them.
5
Preston Hollow disagrees with Truist’s framing and characterization of these issues and
denies that Truist prevails on them. See Parties’ October 24, 2025, Joint Identification of
Early Legal Issues at 1 n.1.

OPINION REGARDING PUNITIVE DAMAGES AND TERMINATION OF TRUSTEE DUTIES, Page 3
I. Background

[¶ 4] The court assumes these facts alleged in Plaintiffs’ Original

Petition (POP) are true:

A. The Financing

[¶ 5] Senior Care Living VI, LLC was created to develop and operate a

senior living facility called Inspired Living at Sugar Land. 6 Senior Care

financed the project with bond financing. 7

[¶ 6] Truist was the initial trustee under (i) the Master Indenture

between Truist and Senior Care and (ii) the Bond Indenture between Truist

and the conduit bond issuer, Woodloch Healthcare Facilities Development

Corporation. 8 The parties collectively call the Master and Bond Indentures

the “Bond Documents.”

[¶ 7] Although Woodloch issued the bonds pursuant to the Bond

Indenture,9 Senior Care was the ultimate bond Obligor. 10

6
POP ¶ 9(a).
7
See POP ¶ 10(a).
8
POP ¶ 11(b).
9
POP ¶ 11(b).
10
POP ¶ 12(a).

OPINION REGARDING PUNITIVE DAMAGES AND TERMINATION OF TRUSTEE DUTIES, Page 4
[¶ 8] Woodloch loaned the bond proceeds to Senior Care under a loan

agreement.11 Senior Care secured that loan with most of its assets, including

the real estate, furniture and fixtures, and the project’s gross receipts.12

[¶ 9] Woodloch assigned its rights and interests under the Bond

Documents and loan agreements to Truist.13

[¶ 10] To perfect the gross revenues collateral pledge, Senior Care and

Truist executed a Deposit Account and Control Agreement (DACA) and a

Blocked Account Control Agreement (BACA), collectively the Account

Control Agreements (ACA).14 Truist held all the ACA-created bank accounts,

into which Senior Care had to deposit all gross receipts and gross revenue.15

In turn, the Bond Documents and ACA required Truist to ensure that all

Blocked Account funds would be used only per Master Indenture § 3.01.16

[¶ 11] Preston Hollow purchased over $21 million in senior bonds for

the project and was the Series 2017A Majority Representative with authority

11
POP ¶ 12(b).
12
POP ¶ 12(c).
13
POP ¶ 12(d).
14
POP ¶ 12(e).
15
POP ¶ 12(f).
16
POP ¶ 12(g).

OPINION REGARDING PUNITIVE DAMAGES AND TERMINATION OF TRUSTEE DUTIES, Page 5
to exercise bondholder and Bond Trustee rights and remedies under the Bond

Indenture.17 Preston Hollow was also the Noteholder Representative

authorized to exercise certain Master Trustee rights and remedies under the

Master Indenture.18

B. Preston Hollow discovered Senior Care’s defaults and Truist’s alleged
breaches.

[¶ 12] Preston Hollow controlled the release of bond funds during

construction.19

[¶ 13] The project was substantially completed by late 2017, and Senior

Care started leasing by early 2018.20

[¶ 14] In 2019, Preston Hollow began learning of multiple Senior Care

defaults21 and directed Truist to send Senior Care default notices.22

[¶ 15] When Senior Care refused to cure its defaults, Preston Hollow

directed Truist to accelerate the bonds and loan, 23 which Truist did on May 31,

17
POP ¶ 13(a).
18
POP ¶ 13(a).
19
POP ¶s 16–17.
20
POP ¶ 18.
21
POP ¶s 19–21.
22
POP ¶ 22.
23
POP ¶ 23.

OPINION REGARDING PUNITIVE DAMAGES AND TERMINATION OF TRUSTEE DUTIES, Page 6
2019. 24 Preston Hollow also made demand on the loan and bond offering’s

guarantor for payment and collateral pledges.25 But the guarantor refused to

comply.26

[¶ 16] On July 12, 2019, Truist appointed two successor trustees. 27

Five days later, Truist resigned, saying it lacked the capacity to oversee the

defaulted bonds and loans. 28

[¶ 17] When Truist resigned, Preston Hollow asked Truist if Senior

Care had deposited its gross revenues into the Blocked Accounts as the Bond

Documents and ACA required.29 Truist disclosed that Senior Care never did

so.30

[¶ 18] Preston Hollow later learned that Truist’s representative

previously approved Senior Care’s deviation from the Bond Documents’ and

ACA’s strict requirements.31

24
POP ¶ 23.
25
POP ¶ 24.
26
POP ¶ 24.
27
POP ¶ 25.
28
POP ¶ 25.
29
POP ¶ 27.
30
POP ¶ 28.
31
POP ¶ 29.

OPINION REGARDING PUNITIVE DAMAGES AND TERMINATION OF TRUSTEE DUTIES, Page 7
[¶ 19] Preston Hollow alleges that Truist committed additional

fiduciary breaches following its resignation. 32

C. Preston Hollow’s Causes of Action

[¶ 20] Asserting essentially the same underlying misconduct, Preston

Hollow alleges three causes of action against Truist: (i) breach of fiduciary

duty, (ii) breach of trust, and (iii) contract breach.33 Preston Hollow further

alleges that it suffered, and continues to suffer, unspecified damages as a direct

and proximate result of Truist’s breaches.34 Preston Hollow also seeks to

recover its attorneys’ fees and costs.35

[¶ 21] Preston Hollow’s prayer requests judgment against Truist for all

damages, pre- and post-judgment interest, attorneys’ fees and expenses,

punitive damages, court costs, and other relief.36

32
POP ¶s 30–34.
33
POP ¶s 52–77.
34
POP ¶s 60, 69, 77.
35
POP ¶ 77.
36
POP ¶ 60 (punitive damages for Count One: Breach of Fiduciary Duty); id. at Prayer.

OPINION REGARDING PUNITIVE DAMAGES AND TERMINATION OF TRUSTEE DUTIES, Page 8
II. Analysis

A. Standard of Review

[¶ 22] Rule of Civil Procedure 166 provides that the trial court “may in

its discretion” direct the parties to appear before it for a pretrial conference to

consider, among other things, “[t]he identification of legal matters to be ruled

on or decided by the court.”37 Tex. R. Civ. P. 166(g). The court “shall make

an order that recites the action taken at the pretrial conference … and which

limits the issues for trial to those not disposed of by admissions, agreements

of counsel, or rulings of the court.” TEX. R. CIV. P. 166. The purpose of this

conference is to “assist in the disposition of the case without undue expense

or burden to the parties.” Id.

[¶ 23] Rule 166(g) thus “authorizes trial courts to decide matters that,

though ordinarily fact questions, have become questions of law because

ʻreasonable minds cannot differ on the outcome.’” JPMorgan Chase Bank,

N.A. v. Orca Assets G.P., LLC, 546 S.W.3d 648, 653 (Tex. 2018) (quoting

Walden v. Affiliated Comput. Servs., Inc., 97 S.W.3d 303, 322 (Tex. App.—

Houston [14th Dist.] 2003, pet. denied)). When a Rule 166(g) order disposes

37
The court copies these paragraphs twenty-two and twenty-three verbatim from Senior
Care Living, VI, LLC v. Preston Hollow Capital, LLC, 695 S.W.3d 778, 816 (Tex. App.—
1st. Dist. 2024, pet denied).

OPINION REGARDING PUNITIVE DAMAGES AND TERMINATION OF TRUSTEE DUTIES, Page 9
of claims in this fashion, the order is akin to a summary judgment order, and

[appellate courts] review the order de novo. Id. If the non-movant has raised

a fact issue on the claim, dismissal under Rule 166(g) is not proper. See

McCreight v. City of Cleburne, 940 S.W.2d 285, 288 (Tex. App.—Waco 1997,

writ denied); see also King Ranch, Inc. v. Chapman, 118 S.W.3d 742, 751 (Tex.

2003) (stating that more than scintilla of evidence exists to raise fact issue

when evidence “rises to a level that would enable reasonable and fair-minded

people to differ in their conclusions”).

B. Rules of Contract and Statutory Construction

[¶ 24] A court’s primary objective when construing contracts “is to

ascertain and give effect to the parties’ intent as expressed in the instrument.”

U.S. Polyco, Inc. v. Texas Cent. Bus. Lines Corp., 681 S.W.3d 383, 387 (Tex.

2023) (quoting URI, Inc. v. Kleberg Cty., 543 S.W.3d 755, 763 (Tex. 2018)).

[¶ 25] Usually, courts deem the contract alone to express the parties’

intent because it is objective, not subjective, intent that controls. Id. With

unambiguous contracts, courts “can determine the parties’ rights and

obligations under the agreement as a matter of law.” Inwood Nat’l Bank v.

Fagin, 706 S.W.3d 342, 347 (Tex. 2025) (per curiam) (quoting ACS Invs., Inc.

v. McLaughlin, 943 S.W.2d 426, 430 (Tex. 1997)).

OPINION REGARDING PUNITIVE DAMAGES AND TERMINATION OF TRUSTEE DUTIES, Page 10
[¶ 26] Similarly, statutory construction’s purpose is to implement the

Legislature’s intent by giving effect to every word, clause, and sentence.

Sunstate Equip. Co. v. Hegar, 601 S.W.3d 685, 689–90 (Tex. 2020). Indeed,

statutory text is the “first and foremost” indication of legislative intent.

Greater Hous. P ’Ship v. Paxton, 468 S.W.3d 51, 58 (Tex. 2015). Thus, courts

apply the words’ common, ordinary meaning unless (i) the text supplies a

different meaning or (ii) the common meaning produces absurd results. Fort

Worth Transp. Auth. v. Rodriguez, 547 S.W.3d 830, 838 (Tex. 2018).

[¶ 27] Further, courts derive statutory meaning from the entire statute.

TEX. GOV’T CODE § 311.021(2); Janvey v. Golf Channel, Inc., 487 S.W.3d 560,

572 (Tex. 2016). So, courts “presume the Legislature chose statutory

language deliberately and purposefully,” Crosstex Energy Servs., L.P. v. Pro

Plus, Inc., 430 S.W.3d 384, 390 (Tex. 2014), and that it likewise excluded

language deliberately and purposefully, Cameron v. Terrell & Garrett, Inc., 618

S.W.2d 535, 540 (Tex. 1981).

C. First Issue

1. The Issue and Short Answer

[¶ 28] Master Indenture § 8.01(e) provides that,

OPINION REGARDING PUNITIVE DAMAGES AND TERMINATION OF TRUSTEE DUTIES, Page 11
In no event shall the Master Trustee be responsible or liable for
special, indirect, punitive or consequential loss or damage of
any kind whatsoever (including, but not limited to, loss of
profit) irrespective of whether the Master Trustee has been
advised of the likelihood such loss or damage and regardless of
the form of action. 38

[¶ 29] The first issue is whether the Trust Code bars that punitive

damages waiver. The answer is “no” because the Trust Code does not reflect

a legislative intent to bar punitive damages waivers in agreements between

sophisticated parties.

2. The Parties’ Arguments

[¶ 30] Truist posits that the punitive damages waiver is valid

consideration for Truist’s agreement to serve as Master Trustee. 39 Relying

primarily on Bombardier Aerospace Corp. v. SPEP Aircraft Holdings, LLC, 572

S.W.3d 213, 231 (Tex. 2019), Truist further argues that sophisticated parties

are free to contract and that liability limitation clauses are valid limited

warranties that were the basis of the parties bargain.40 Truist also cites

38
Defendant Truist Bank’s Appendix in Support of Rule 166(g) Motion for Determination
of Early Legal Issues (Truist App’x.) at 84.
39
Defendant Truist Bank’s Rule 166(g) Motion for Determination of Early Legal Issues
(Truist’s Mot.) at 24. This opinion does not address § 8.01(e)’s enforceability for any other
purpose.
40
Truist’s Mot. 24–29.

OPINION REGARDING PUNITIVE DAMAGES AND TERMINATION OF TRUSTEE DUTIES, Page 12
Bombardier for the premise that even fraud does not automatically vitiate a

liability limitation clause.41 Thus, Truist urges that the punitive damages

waiver is enforceable and precludes Preston Hollow from recovering punitive

damages here.42

[¶ 31] Preston Hollow relies on Mendell v. Scott, No. 01-20-00578

2023 WL 4712050, *13 (Tex. App—1st Dist. July 25, 2023, pet. denied) to

argue that Trust Code § 114.007 precludes enforcing punitive damages

waivers favoring trustees where the trustee is found to have breached their

duty in bad faith, intentionally, or with reckless disregard for the purpose of

the trust. 43 Preston Hollow further cites Ridge Nat. Res., L.L.C. v. Double Eagle

Royalty, L.P., 564 S.W.3d 105, 138 (Tex. App.—8th Dist. 2018, no pet.) to

assert that courts refuse to enforce contract provisions in direct conflict with

statutory protections. 44

[¶ 32] The parties did not identify any Texas cases directly on point,

and this court has not found any such case.

41
Truist’s Mot. at 25.
42
Truist’s Mot. at 27–29.
43
Preston Hollow’s Response to Defendant’s Rule 166(g) Motion for Determination of
Legal Issues (Preston Hollow’s Resp.) at 32.
44
Preston Hollow’s Resp. at 32.

OPINION REGARDING PUNITIVE DAMAGES AND TERMINATION OF TRUSTEE DUTIES, Page 13
3. Texas permits punitive damages exclusions in trust agreements.

a. Bombardier

[¶ 33] Texas generally permits punitive damages waivers in negotiated

contracts between sophisticated parties, at least in fraud cases. Bombardier,

572 S.W.3d at 231–32 (Tex. 2019).

[¶ 34] Specifically, Bombardier involved a buyer’s fraud by non-

disclosure claim against an aircraft manufacturer.45 The buyer alleged that the

seller fraudulently failed to disclose negative history about an engine thereby

inflating the aircraft’s value. There were two contracts at issue, and both

contracts had a liability limitation clause purporting to limit the seller’s

liability for indirect, special, consequential damages or punitive damages for

any reason. Id. at 217–218.

[¶ 35] The trial court entered judgment for the buyer based on the

verdict awarding $2,694,160 in out of pocket/diminished-value damages and

$5,388,320 in punitive damages. The court of appeals affirmed that

judgment. Id. at 219.

45
For simplicity, the court refers to multiple plaintiffs as the buyer and both defendants as
the seller.

OPINION REGARDING PUNITIVE DAMAGES AND TERMINATION OF TRUSTEE DUTIES, Page 14
[¶ 36] The supreme court affirmed the actual damages judgment but

reversed the punitive damages judgment based on a contract liability

limitation clause that precluded punitive damages. See id. at 230–33. That

decision relied on (i) freedom of contract principles and (ii) that the clause did

not preclude the actual damages.46 Id.

[¶ 37] The court concluded by holding that,

Although [seller’s] conduct in failing to provide [buyers] with
the new engines they bargained for was reprehensible, the
parties bargained to limit punitive damages, and we must hold
them to that bargain.

Id. at 233. However, the court said it was not addressing the enforceability of

a clause precluding punitive damages in a fiduciary context. Id. 231–32.

b. Preston Hollow’s Authorities

i. Mendell v. Scott

[¶ 38] Preston Hollow’s response did not address Bombardier.47

Instead, it cited Mendell v. Scott, No. 01-20-00578-CV, 2023 WL 4712050

(Tex. App.—1st Dist. July 25, 2023, pet. denied) for the premise that Trust

Code § 114.007 prevents enforcing the Master Indenture’s punitive damages

46
The opinion does not discuss whether the liability limitation would apply to special or
consequential damages.
47
See Preston Hollow’s Resp. passim.

OPINION REGARDING PUNITIVE DAMAGES AND TERMINATION OF TRUSTEE DUTIES, Page 15
exclusion for acts committed in bad faith, intentionally, or with reckless

disregard for the purpose of the trust. 48 The court rejects that argument

because Mendell did not address that issue.

[¶ 39] Instead, that court addressed § 114.007’s application to an

actual damages award where evidence supported findings that the trustee

acted with malice, and thus in bad faith or intentionally. See Mendell, 2023

WL 4712050, at *11–14. The court explained that when a trustee invokes as

an affirmative defense a clause purporting to exempt a trustee from liability for

actual damages, to recover actual damages, the burden shifts to the beneficiary

to prove that the trustee acted in bad faith, intentionally, or with reckless

disregard for the beneficiary’s interest. Id. So, in that context, the court

concluded that,

Thus, because there is sufficient evidence to support the jury’s
specific intent malice finding, and therefore an implied finding
that Mendell committed a breach of trust in bad faith or
intentionally, we conclude that the applicability of the
exculpatory clause was not conclusively established by the
evidence such that Mendell is excluded from all liability in her
individual capacity.49

48
Preston Hollow’s Resp. at 32.
49
That is, to prevail on appeal given the jury’s findings adverse to him, Mendell had to show
that there was legally or factually insufficient evidence supporting the jury’s verdict that

OPINION REGARDING PUNITIVE DAMAGES AND TERMINATION OF TRUSTEE DUTIES, Page 16
Id. at *14. Thus, the court affirmed the trial court’s actual damages judgment

against (Mendell) the trustee. Id. at *14, 31.

[¶ 40] That court later addressed challenges to the actual and punitive

damages awards based on arguments that there was legally and factually

insufficient evidence to support the jury’s findings that the trustee breached

her fiduciary duties with the mental state required to support awarding actual

and punitive damages. Id. at *16–23. However, that opinion does not address

whether the liability limitation clause applied to prevent the recovery of

punitive damages in that case. See id. Accordingly, Mendell does not guide

this court here.

ii. Ridge Natural Resources, L.L.C. v. Double Eagle Royalty

[¶ 41] Preston Hollow next urges that punitive damages serve a vital

role by deterring and punishing egregious breaches of trust. 50 From there, it

posits that reading the punitive damages waiver to bar punitive damages in

instances involving intentional, malicious, or grossly reckless misconduct

would violate Civil Practice and Remedies Code § 41.003(a)(1)’s safeguards.51

he acted in bad faith, intentionally, or with reckless disregard for the appellees’ interests,
which Mendell failed to do.
50
Preston Hollow’s Resp. at 32.
51
Preston Hollow’s Resp. at 32.

OPINION REGARDING PUNITIVE DAMAGES AND TERMINATION OF TRUSTEE DUTIES, Page 17
Preston Hollow then cites to Ridge Natural Resources, L.L.C. v. Double Eagle

Royalty, L.P., 564 S.W.3d 105 (Tex. App.—8th Dist. 2018) for the premise

that courts refuse to enforce contract clauses that operate in direct conflict

with statutory mandates or public policy.52

[¶ 42] The court rejects Preston Hollow’s arguments for several

reasons:

[¶ 43] First, Ridge was a common law fraud case that predating

Bombardier’s holding that a contract clause between sophisticated parties that

precludes punitive damages in a common law case is enforceable. Thus,

Bombardier implicitly overrules Ridge.

[¶ 44] Second, Ridge misreads § 41.003(a)(1) as creating a statutory

right to recover punitive damages in a fraud case.53 See Ridge, 564 S.W.3d. at

135–37. But as that appellant argued (id. at 136), § 41.003(a)(1)’s text

provides only procedural standards governing punitive damages claims in

52
Preston Hollow’s Resp. at 32.
53
Although this statute uses the words “Exemplary damages,” this opinion uses “punitive
damages” interchangeably.

OPINION REGARDING PUNITIVE DAMAGES AND TERMINATION OF TRUSTEE DUTIES, Page 18
common law fraud cases, without creating a statutory right to recover them.54

See TEX. CIV. PRAC. & REM. CODE § 41.003(a)(1).

[¶ 45] Although § 41.003(c), which that court (and Preston Hollow) did

not address, concerns statutory causes of action that authorizes punitive

damages in specified circumstances, that provision merely sets the claimant’s

burden of proof to recover punitive damages.

[¶ 46] Finally, Ridge does not involve Trust Code § 114.007, let alone

that statute’s proper interpretation and application.

[¶ 47] Accordingly, Ridge is not persuasive authority on this issue.

c. The Master Indenture’s punitive damages waiver is enforceable.

i. Overview

[¶ 48] Preston Hollow argues that courts refuse to enforce contract

clauses that operate in direct conflict with statutory mandates or public policy.

But Preston Holow did not cite a statute with which Truist’s punitive damages

waiver directly conflicts. Nor did the court find one. However, Master

Indenture § 8.01(e) comports with legislative intent to protect compensatory

and equitable remedies resulting from certain trustee breaches by making

54
The legislature in 2003 amended parts of the Civil Practice and Remedies Code Ch. 41.,
however, those changes do not affect Bombardier’s holdings or this court’s Ridge analysis.
See generally, 2003 TEX. SESS. LAW SERV. Ch. 204 (H.B. 4) (Vernon’s).

OPINION REGARDING PUNITIVE DAMAGES AND TERMINATION OF TRUSTEE DUTIES, Page 19
those remedies nonwaivable without also making punitive damages

nonwaivable. See TRUST CODE §§ 111.0035, 114.001, and 114.007.

[¶ 49] Further, Bombardier recognizes that public policy generally

permits punitive damages waivers between sophisticated parties. 572 S.W.3d

at 231–32. And the Trust Code furthers this public policy by making the non-

compensatory disgorgement remedy’s deterrent effect nonwaivable. See

TRUST CODE § 114.007(a)(2).

[¶ 50] In sum, construing Master Indenture § 8.01(e) according to its

unambiguous terms and applying Trust Code §§ 111.0035, 114.001, and

114.007, pursuant to their plain language and the applicable rules of

construction yields the conclusion that the punitive damages waiver is

enforceable.

ii. Contract Construction

[¶ 51] Whether Master Indenture § 8.01(e) precludes Preston Hollow’s

ability to recover punitive damages is a matter of contract and statutory

construction.55

55
The parties did not raise whether that clause limits Preston Hollow’s compensatory
damages. Thus, the parties and the public should not read this opinion to express any
opinion on that issue, which is not before the court.

OPINION REGARDING PUNITIVE DAMAGES AND TERMINATION OF TRUSTEE DUTIES, Page 20
[¶ 52] Here, neither side contends the Master Indenture is ambiguous

on this issue. And the court agrees with them: The parties objectively agreed

that Truist would not be responsible for punitive damages for any

misconduct.56 See Inwood Nat’l Bank, 706 S.W.3d at 347 (courts can

determine parties’ rights from unambiguous agreements); U.S. Polyco, 681

S.W.3d at 387 (court’s objective to ascertain and give effect to the parties’

intent expressed in the agreement). Thus, whether Trust Code § 114.007

overrides that agreement is a matter of statutory construction.

iii. Statutory Construction.

[¶ 53] As a matter of statutory construction, the court concludes that

the legislature did not bar enforcing the punitive damages waiver because the

Trust Code, particularly §§ 111.0035, 114.001, and 114.007, does not

expressly preclude such waivers and those sections support permitting them.

[¶ 54] For starters, § 111.0035 provides that certain mandatory default

protections—including § 114.007’s restrictions on exculpation clauses—may

not be limited by agreement. But § 111.0035 does not expressly bar punitive

damages waivers. Nor do §§ 114.001 and 114.007.

56
The court does not address that clause’s enforceability regarding other potential
recoveries.

OPINION REGARDING PUNITIVE DAMAGES AND TERMINATION OF TRUSTEE DUTIES, Page 21
[¶ 55] Next, §§ 114.001 and 114.007 are complementary statues that

should be construed together (along with § 111.0035) to also provide certain

nonwaivable recoveries related to trustee breaches. TEX. GOV’T. CODE

§ 311.021(2); Janvey, 487 S.W.3d at 572.

[¶ 56] To that end, Trust Code § 114.001, captioned “Liability of

Trustee to Beneficiary,” concerns beneficiaries’ remedies when a trustee

breaches its trust duties. Specifically, that statute subjects breaching trustees

to equitable constructive trust, disgorgement, and accounting remedies. See

TRUST CODE § 114.001(a). Additionally, it contemplates compensatory

damages resulting from trustee breaches:

(c) A trustee who commits a breach of trust is chargeable with
any damages resulting from such breach of trust, including but
not limited to: (1) any loss or depreciation in value of the trust
estate as a result of the breach of trust; (2) any profit made by
the trustee through the breach of trust; or (3) any profit that
would have accrued to the trust estate if there had been no
breach of trust.

TRUST CODE § 114.001(c). But § 114.001 does not mention punitive damages.

[¶ 57] Likewise, the Trust Code places these limitations on trustee

exculpation clauses:

(a) A term of a trust relieving a trustee of liability for breach of
trust is unenforceable to the extent that the term relieves a
trustee of liability for: (1) a breach of trust committed: (A) in

OPINION REGARDING PUNITIVE DAMAGES AND TERMINATION OF TRUSTEE DUTIES, Page 22
bad faith; (B) intentionally; or (C) with reckless indifference to
the interest of a beneficiary; or (2) any profit derived by the
trustee from a breach of trust.

Id., § 114.007(a); see also id., § 111.0035(b)(4)(B) (trust may not limit a

trustee’s duty to act in in good faith and in accordance with the purposes of the

trust). However, nothing in this statute expressly bars punitive damages

waivers.

[¶ 58] In short, §§ 111.0035, 114.001, and 114.007 express legislative

intent regarding (i) a trustee’s liabilities to beneficiaries generally, (ii) and

liabilities associated with trustee breaches specifically, (iii) beneficiaries’

remedies for those breaches, and (iv) which remedies are nonwaivable. But

nowhere do those statutes state that punitive damages are nonwaivable.

[¶ 59] Had the legislature intended to bar clauses that exclude

awarding punitive damages connected to a breach of trust committed in bad

faith, intentionally, or with reckless indifference to a beneficiary’s interests, it

would have done so. But it did not. Thus, those omissions individually and

collectively reflect legislative intent that punitive damages are waivable in

sophisticated agreements. See City of Houston v. Williams, 353 S.W.3d 128,

145 (Tex. 2011) (inclusio unius a sound construction maxim absent a valid

OPINION REGARDING PUNITIVE DAMAGES AND TERMINATION OF TRUSTEE DUTIES, Page 23
alternative construction); Scalia and Garner, Reading Law: The Interpretation

of Legal Texts, 107–11 (2012).

[¶ 60] Moreover, § 114.007(a)(2)’s mandatory protection for the

disgorgement of profits a trustee obtains from a breach of trust serves a

deterrent purpose like punitive damages. That is, punitive damages are not

compensatory; they exist to punish the defendant for outrageous conduct and

deter future such behavior by that defendant or others. Bombardier, 572

S.W.3d at 230.

[¶ 61] Similarly, disgorging improper trustee benefits does not

compensate for beneficiary losses. Instead, it serves to punish trustee

misconduct and to deter it and others from engaging in similar future conduct.

So, § 114.007(a) strikes a balance between (i) contract freedom and (ii)

deterring and punishing trustees for their breaches.

[¶ 62] Finally, Bombardier’s reasoning provides a paradigm for

analyzing whether the Trust Code bars punitive damages waivers.

Specifically, Bombardier reasons that the punitive damages waiver was

enforceable there because it did not preclude liability for fiduciary breaches or

prevent the buyer from recovering compensation for its injury. See

Bombardier, 572 S.W.3d at 232. Likewise, enforcing Master Indenture’s

OPINION REGARDING PUNITIVE DAMAGES AND TERMINATION OF TRUSTEE DUTIES, Page 24
punitive damages waiver here does not deprive Preston Hollow of its non-

punitive damages remedies.

[¶ 63] Accordingly, the court concludes that the Trust Code, including

§ 114.007, does not bar enforcing the Master Indenture § 8.01(e)’s liability

limitation clause.

D. Second Issue

[¶ 64] The second issue is whether the Master Indenture’s punitive

damages exclusion also applies to claims based on alleged Bond Indenture

breaches. The answer is “yes” because (i) the Master Indenture and Bond

Indenture are separate documents that are integral parts of a single agreement

involving multiple parties and (ii) those contracts reference the same project

and financing. Indeed, the parties collectively refer to both documents under

the singular title “Bond Documents” throughout their submissions.

[¶ 65] Generally, separate contracts executed at the same time, for the

same purpose, and in the same transaction are considered one instrument and

construed together. CC&T Enterprises, L.L.C. v. Texas 1031 Exch. Co., 673

S.W.3d 631, 642 (Tex. 2023); see Rieder v. Woods, 603 S.W.3d 86, 94–95 n.35

(Tex. 2020); Sullivan v. Microsoft Corp., 618 S.W.3d 926, 931–32 (Tex.

App.—8th Dist. 2021, no pet.).

OPINION REGARDING PUNITIVE DAMAGES AND TERMINATION OF TRUSTEE DUTIES, Page 25
[¶ 66] Here, the Master Indenture and Bond Indenture were executed

as of the same time and as part of the same bond financing Senior Care used

for the Inspired Living at Missouri City project. 57 Both documents refer to that

project.58 And the Master Indenture serves as a security agreement for the

loan related to the bonds. In fact, paragraph 12 of Preston Hollow’s petition

describes the documents connected and integral relationship. 59

[¶ 67] Accordingly, the court concludes that the punitive damages

waiver applies to claims under either document.

E. Third Issue

1. Introduction

[¶ 68] The parties also asked the court to provide guidance regarding

the nature of Truist’s continuing duties to Preston Hollow after Truist

resigned as trustee and was replaced by substitute trustees.

[¶ 69] The parties agree—and the court concurs—that resignation

does not relieve a trustee of liability for any claims that accrued before a

57
See Truist App’x. at 6, 131 (bonds’ purpose under both agreements is to finance the
Missouri City project, both dated as of January 1, 2017); compare generally Truist App’x.
1–125 with 126–230.
58
See Truist App’x. 6, 131.
59
See POP. ¶s 11–12.

OPINION REGARDING PUNITIVE DAMAGES AND TERMINATION OF TRUSTEE DUTIES, Page 26
trustee’s resignation and replacement. See Hoenig v. Tex. Com. Bank, N.A.,

939 S.W.2d 656, 663 (Tex. App.—4th Dist. 1996, no writ); see also

Restatement (Third) of Agency § 8.04 (2006) (“Throughout the duration of

an agency relationship, an agent has a duty to refrain from competing with the

principal and from taking action on behalf of or otherwise assisting the

principal’s competitors.”).

[¶ 70] Next, the court addresses Truist’s potential post-termination

fiduciary duties.

2. Contract Duties

[¶ 71] Truist’s contract duties ended when it resigned and was replaced

as trustee, subject to any surviving contract duties outlined in the Bond

Documents, none of which were presented to the court. See Rep. Nat. Bank &

Trust Co. v. Bruce, 105 S.W.2d 882, 885 (Tex. 1937) (trust may set how

trustee may be discharged of their duties); see also Illinois Tool Works, Inc. v.

Harris, 194 S.W.3d 529, 535 (Tex. App.—14th Dist. 2006, no pet.) (contract

duties end after valid termination).

3. Fiduciary Duties

[¶ 72] Fiduciary duties are different. Like other agency relationships,

trustee fiduciary duties generally terminate with the relationship creating

OPINION REGARDING PUNITIVE DAMAGES AND TERMINATION OF TRUSTEE DUTIES, Page 27
those duties. Clinkenbeard v. Cent. Sw. Oil Corp., 526 F.2d 649, 652 (5th Cir.

1976); Maeberry v. Gayle, 955 S.W.2d 875, 879 (Tex. App.—13th Dist. 1997,

no pet.) (trustee); 2A C.J.S. Agency § 293 (2025) (“In general, following the

absolute termination of the agency relationship, the rules as to the duties of

loyalty and good faith owed by the agent to the principal do not apply.”). Once

the agency terminates, the agent may deal with the principal at arm’s length.

Clinkenbeard, 526 F.2d at 652.

[¶ 73] But certain common law duties survive the relationship’s

termination. One such duty is to not use or disclose the principal’s

confidential information. Id. at 652 n.3; Miller Paper Co. v. Roberts Paper Co.,

901 S.W.2d 593, 600 (Tex. App.—7th Dist. 1995, no writ); Restatement

(Third) Of Agency § 8.05 (2006) (Comment (c)) (“An agent’s duties

concerning confidential information do not end when the agency relationship

terminates.”); 2A C.J.S. Agency § 293 (2025) (same).

[¶ 74] Thus, Truist has a surviving duty to not use Preston Hollow’s

confidential or proprietary information, acquired during Truist’s tenure as

trustee, against Preston Hollow. Otherwise, Truist’s fiduciary duties to

Preston Hollow ended when Truist resigned as trustee and at least one

substitute trustee accepted its appointment as trustee.

OPINION REGARDING PUNITIVE DAMAGES AND TERMINATION OF TRUSTEE DUTIES, Page 28
Conclusion

[¶ 75] These conclusions apply during this case unless the court later

modifies them based on new information.

[¶ 76] In reaching these conclusions, the court (i) assumes the truth of

Preston Hollow’s factual allegations in its live pleadings and the applicable

contracts and (ii) makes no factual determinations or suggestions regarding

whether Truist’s alleged misconduct occurred or what other remedies Preston

Hollow may have if that conduct occurred.

BILL WHITEHILL
Judge of the Texas Business Court,
First Division

SIGNED: December 19, 2025

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