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
OPINION REGARDING PUNITIVE DAMAGES AND TERMINATION OF TRUSTEE DUTIES, Page 29