Case No. 24-1070
In 2018 the City of Hutto created a public improvement district (PID) near city hall and, to finance the improvements under the PID Act, created a local government corporation, River Creek Development Corporation, under the Transportation Code.1 River Creek borrowed $17.4 million from a Wisconsin conduit bond issuer, Public Finance Authority (PFA), through a Loan Agreement and Promissory Note, hired 79 HCD Development, LLC to build the improvements, and sold them to the City under an Interlocal Agreement structured as an installment sale paid from assessments on property in the district; PFA issued bonds to fund the loan, and Preston Hollow Capital bought them.2 River Creek never submitted the note and its supporting contracts to the Attorney General for examination.3 After new city leaders took office, the City and River Creek asked the Attorney General's view on the transaction's validity, and the Attorney General declined to opine on its propriety.4 Preston Hollow says the new administration filed this suit less than two weeks after the new mayor was sworn in, after the City had spent the $17.4 million on public improvements.5
One month after the Attorney General's response, the City and River Creek sued for a declaration that the transaction was void, including for failure to submit the documents to the Attorney General, and Preston Hollow counterclaimed for declarations that the note and contracts were enforceable and did not have to be submitted.1 The trial court granted Preston Hollow summary judgment on all claims and awarded it attorney's fees.2 The Third Court of Appeals affirmed, holding that submission was required but that failing to submit did not void the documents, that the transaction did not violate the PID Act, and rejecting the evidentiary and fee challenges.3 The vehicle in this Court is a petition for review filed by River Creek and the City, argued on March 3, 2026, and decided on June 12, 2026.4
Petition for review from the Third Court of Appeals (Austin) after a trial-court summary judgment; argued March 3, 2026, and decided June 12, 2026.5
River Creek and the City present four issues:1 1. Whether the Loan Agreement, Note, Interlocal Agreement, and Construction Contract are void because they were not submitted to the Attorney General as Chapter 431 of the Transportation Code requires. 2. Whether the Loan Agreement, Note, and Interlocal Agreement are void because they do not comply with the PID Act, Chapter 372 of the Local Government Code. 3. Whether the trial court should have admitted two attorney opinion letters offered by Preston Hollow as summary-judgment evidence. 4. Whether the trial court should have awarded Respondents attorney's fees.
The Court did not state a standard of review. It decided the issues as questions of statutory construction on summary judgment, treated the admission of the opinion letters as harmless because the trial court's ruling was one of law, and treated whether a fee award is "equitable and just" as a matter of the trial court's discretion.1
Whether failing to submit the documents to the Attorney General voids the transaction.
River Creek and the City (Petitioners): Government contracts made in violation of statutory requirements are ultra vires and void, and Chapter 431 requires the Attorney General to examine these documents, which did not happen.1 In reply, they say the court of appeals sidestepped these issues and answered an unasked question about statutory defenses, and that a governmental entity cannot make payments under an illegal transaction.2
Preston Hollow, PFA, and the other Respondents: Section 431.071 does not condition validity or enforceability on Attorney General approval; approval only gives the municipality a statutory defense against later challenge, and the argument was not preserved.3 PFA adds that requiring Attorney General review of this transaction would require review of billions of dollars in bonds issued each year and challenge the legitimacy of the private bond market available to Texas political subdivisions.4
Whether the transaction violates the PID Act.
River Creek and the City (Petitioners): The Loan Agreement, Note, and Interlocal Agreement violate Chapter 372 because PFA's costs of issuance are not recoverable costs of improvements under the PID Act.5
Preston Hollow and PFA (Respondents): The argument was forfeited in the trial court; the PID Act's limits on bonds do not apply because the bonds were issued under Wisconsin law; and Section 372.026(f) allows payment for indebtedness issued to pay the corporation's costs of issuance, which became River Creek's when it assumed them and were properly included in the installment payments.6
Whether the opinion letters and the fee award were error.
River Creek and the City (Petitioners): Conclusory statements by the City's former counsel should not have been admitted, and Respondents neither argued nor proved that the fees were equitable and just.7
Preston Hollow (Respondent): The letters are non-hearsay and not legal conclusions, no ruling was obtained on the objection, and no harm is shown; the trial court acted within its discretion on fees.8
River Creek and the City argued that the court of appeals erred in holding the documents enforceable despite the lack of Attorney General examination and the PID Act violations, and in the evidence and fee rulings.1 Respondents answered that the petition seeks to let a city declare its loan documents void while keeping the funds it received.2
Unofficial and machine-generated: YouTube’s automatic captions of the Court’s recording, with no speaker names and frequent errors in names, numbers and legal terms. Use the video, linked at each time stamp, as the record of what was said.
Although Section 431.071 of the Transportation Code mandates submission of the note and its supporting contracts to the Attorney General, the logically necessary consequence of failing to submit is only that the corporation loses the statutory defense of incontestability, not that the transaction is void, and the transaction did not violate the PID Act.1
Consequence of non-submission. "Shall" creates a mandatory duty, so the Court asked what consequences follow, applying one only if it is explicit in the text or logically necessary to accomplish the statute's purpose.2 The express consequence of obtaining approval is incontestability, and the logically necessary inverse of failing to obtain approval is that the corporation cannot invoke that defense.3 Treating an unapproved note as unauthorized is not logically necessary for three reasons: the statute distinguishes authorization from approval; the statute's purposes are fulfilled without a voidness rule because unapproved instruments remain subject to challenge as unauthorized by anyone with standing; and the Legislature knows how to condition validity on Attorney General approval and did not do so here.4
PID Act. The PID Act allows improvement costs to be paid either from bonds issued by certain state entities under Section 372.024 or under an installment sales contract with the person who acquires or builds the improvements, and the parties used the second method, so the limits on bond issuers do not apply to the Interlocal Agreement.5 The Court acknowledged the concern that the transaction accomplishes indirectly what would be prohibited directly but said that concern is for the Legislature, because courts must follow the text as written.6
Remaining issues. River Creek and the City did not properly object to the opinion letters as hearsay, and any error in admitting them as legal conclusions was harmless because the summary-judgment ruling was one of law; whether a fee award is "equitable and just" is addressed to the trial court's discretion and needs no separate proof.7
Concurrence. Justice Hawkins, joined by Chief Justice Blacklock, concurred in the judgment, finding both parties' positions unsatisfactory, reluctantly declining to depart from the parties' arguments, and stating that the Court's reading of the PID Act endorses a loophole that lets local governments use taxpayer-funded assessments to pay out-of-state issuers' costs through "installment sales contracts".8 He also noted that Chapter 1202 of the Government Code may independently have required Attorney General review of the note, an argument the parties did not develop.9
Court of appeals' judgment affirmed.10
Joined by Bland, Devine, Huddle, Lehrmann, Sullivan, and Young, JJ.
Joined by Blacklock, C.J.
The following is current as of October 9, 2026.
| Date | Event |
|---|---|
| 01/29/2025 | Petition for Review (River Creek Development Corporation, et al) |
| 04/04/2025 | Response to Petition (Preston Hollow Capital, LLC, et al) |
| 05/19/2025 | Reply to Response (River Creek Development Corp., et al) |
| 06/20/2025 | Brief on the Merits Ordered |
| 08/18/2025 | Petitioner's Brief on the Merits |
| 10/08/2025 | Respondent's Brief on the Merits |
| 10/08/2025 | Respondents' Brief on the Merits |
| 10/23/2025 | Reply Brief (River Creek Development Corporation, et al) |
| 03/03/2026 | Oral argument Argued on behalf of Petitioners by George E. Hyde; Argued on behalf of Respondents by David S. Coale |
| 06/12/2026 | Opinion issued The Court affirms the court of appeals' judgment. Justice Busby delivered the opinion of the Court. |
| 08/24/2026 | Mandate issued |
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