By Chris Bankler

In Preston Hollow Capital, LLC v. Truist Bank, Cause No. 25-BC01B-0030, the Texas Business Court issued a detailed opinion addressing three recurring issues in sophisticated financing disputes: (1) whether the parties’ contract that barred punitive damages was enforceable, (2) whether such a waiver in one transaction document applies across a multi-document financing, and (3) what fiduciary duties—if any—survive a trustee’s resignation.

Background

Preston Hollow sued Truist in its former capacity as trustee under a bond financing for a senior-living project. Preston Hollow asserted claims for breach of fiduciary duty, breach of trust, and breach of contract, and sought compensatory and punitive damages.

The parties jointly asked the Texas Business Court to resolve several threshold legal issues under Rule 166(g), including whether contractual limitations on punitive damages were enforceable under the Texas Trust Code and whether Truist owed continuing fiduciary duties after resigning as trustee.

The Court’s Rulings

1. The Court Enforced the Punitive-Damages Waiver Based on Freedom of Contract

Judge Whitehill’s analysis started with contractual interpretation and freedom-of-contract principles, emphasizing that Texas law generally enforces negotiated liability limitations between sophisticated parties—including waivers of punitive damages. Relying on the Texas Supreme Court’s decision in Bombardier Aerospace Corp. v. SPEP Aircraft Holdings, LLC, the court explained that:

“Public policy generally permits punitive damages waivers between sophisticated parties.”

The court framed the issue first as one of contract construction, noting that the parties did not dispute that the punitive-damages waiver was unambiguous. Under settled Texas law, that ended the inquiry unless a statute clearly prohibited enforcement: “Construing Master Indenture § 8.01(e) according to its unambiguous terms … yields the conclusion that the punitive damages waiver is enforceable.”

The court emphasized that enforcing the waiver did not eliminate liability altogether or deprive the beneficiary of meaningful remedies. Rather, it reflected a bargained-for allocation of risk: “Enforcing Master Indenture’s punitive damages waiver here does not deprive Preston Hollow of its non-punitive damages remedies.”

Only after grounding its decision in contractual freedom did the court turn to the Trust Code—and concluded that nothing in the statute displaced the parties’ agreement. While the Trust Code identifies certain non-waivable remedies, it does not make punitive damages non-waivable:

“The Trust Code … does not expressly preclude such waivers, and those sections support permitting them.” The court underscored that if the Legislature had intended to prohibit punitive-damages waivers in trust agreements, it would have said so: “Had the legislature intended to bar clauses that exclude awarding punitive damages … it would have done so. But it did not.”

In short, the court enforced the waiver because Texas contract law allows it, and the Trust Code does not override that contractual allocation of risk.

2. The Waiver Applies Across the Entire Financing Transaction

The court then determined that the punitive-damages waiver contained in the Master Trust Indenture applied not only to claims under that document, but also to claims asserted under a related Bond Indenture executed as part of the same financing. Applying settled Texas law on integrated contracts, the court explained: “Separate contracts executed at the same time, for the same purpose, and in the same transaction are considered one instrument and construed together.” Because the Master Indenture and Bond Indenture were contemporaneous, interrelated, and repeatedly referred to collectively as the “Bond Documents,” the court concluded that the waiver applied across both agreements.

3. Most Fiduciary Duties End Upon Resignation—Except Confidentiality

Finally, the court addressed whether the trustee owed continuing fiduciary duties after resigning as trustee and being replaced by successor trustees. The court observed that: (1) Contractual duties end upon resignation (absent express survival provisions), and generally, fiduciary duties terminate when the trustee relationship ends.

However, one fiduciary obligation survives termination: “An agent’s duties concerning confidential information do not end when the agency relationship terminates.” Accordingly, a former trustee may not use or disclose confidential or proprietary information obtained during the trust relationship against a former beneficiary—even after resignation.

Key Takeaways from this Texas Business Court Opinion

This opinion provides important guidance from the Texas Business Court on contractual risk allocation in business transactions.

Key takeaways include:

• Punitive-damages waivers remain enforceable absent an express statutory prohibition.
• Liability-limiting provisions may apply transaction-wide, even if contained in only one document.
• Post-resignation fiduciary duties are narrow and largely limited to confidentiality obligations.

The opinions expressed are those of the authors and do not necessarily reflect the views of the firm, its clients, or any of its or their respective affiliates. This article is for informational purposes only and does not constitute legal advice. For more information, please contact Chris Bankler or a member of the Trial & Appellate Litigation practice.

Meet Chris

Chris Bankler focuses on the resolution of disputes for businesses and financial institutions. He counsels clients through the process of complex business litigation, including general business disputes, fraud claims, breach of fiduciary duty cases, and complex business bankruptcy litigation. He has served as litigation counsel in more than 100 cases in state and federal courts, as well as FINRA and AAA arbitrations.