The Texas Business Court's Division 1 has issued a significant ruling clarifying when Title 9 of the Texas Property Code (the Trust Code) applies to commercial trust indentures. In Preston Hollow Capital, LLC v. Truist Bank, 2026 Tex. Bus. 59 (1st Div. Aug. 14, 2026), the court held that a bond trustee's duties are governed by contract, not by statutory trust law, when the bond documents do not effect a complete transfer of legal title to trust property.

Background: A Bond Financing Dispute

In January 2017, Branch Bank & Trust Company (now Truist Bank) agreed to act as trustee in a bond offering issued to raise money to develop a senior living facility. Preston Hollow Capital, LLC and PHCC LLC (collectively, Preston Hollow) purchased more than $21 million in senior bonds. Preston Hollow first sued Truist in Dallas District Court in May 2023, and the parties agreed in July 2025 to refile the suit in the Business Court. In October 2025, the parties briefed issues concerning the scope of Truist's applicable legal duties as bond trustee to Preston Hollow as a bond purchaser, the validity of the trust agreement's punitive damage waiver, and Truist's post-resignation duties after new trustees were appointed. The court previously ruled on the latter two issues in a separate opinion.

The Central Issue: Express Trust or Contractual Arrangement?

The dispositive question was whether the bond documents created an express trust subject to the Trust Code's statutory duties, or merely a contractual trustee relationship. The court framed the issue with precision:

The primary issue here is whether indenture documents executed as part of a bond financing arrangement created an express trust imposing formal fiduciary duties on the bond trustee. Creation of an express trust (other than by a declaration of trust) requires the grantor to completely transfer legal title to the trust property to the trustee to hold for a beneficiary's benefit.

The Court's Holding: No Transfer of Title, No Express Trust

The court concluded that because the bond documents did not transfer complete legal title to Truist, they failed to create an express trust governed by the Trust Code. The court held: "Because the bond documents here do not transfer legal title, (i) the bond documents did not create an express trust and (ii) the documents' terms define the bond trustee's duties to the bond holders." Consequently, Truist did not owe Preston Hollow the statutory duties imposed by the Trust Code. Instead, the court ruled that "Truist's duties were generally limited to those defined by the contracts governing the parties' relationship."

Implications for Bond Indenture Practice

This decision provides important clarity for parties to commercial bond transactions in Texas. The court's holding establishes that the mere use of trust terminology in bond indentures—and the designation of a party as "trustee"—does not automatically trigger the Trust Code's statutory framework. Instead, the critical inquiry is whether legal title to trust property has been completely transferred to the trustee. Where no such transfer occurs, the trustee's duties are defined by the contractual terms of the indenture documents, not by statutory or common law fiduciary obligations. This ruling may significantly impact how bondholders pursue claims against indenture trustees and how such trustees assess their exposure to liability beyond the four corners of the governing agreements.