# River Creek Dev. Corp. v. Preston Hollow Capital, LLC Supreme Court of Texas, No. 24-1070 **River Creek Dev. Corp. v. Preston Hollow Capital, LLC, No. 24-1070 (Tex. June 12, 2026). Holding: 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.** Practice areas: financial services ## Key issues - A local government corporation's failure to submit a note and supporting contracts to the Attorney General for examination does not void the financing; the consequence is that the corporation loses the statutory defense of incontestability. - The $17.4 million installment-sale financing did not violate the PID Act's Texas-issuer requirement, so the city and its corporation could not escape repaying the bondholder. ## Factual History 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 (Opinion, PDF pp. 2-3). 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 (Opinion, PDF p. 3). River Creek never submitted the note and its supporting contracts to the Attorney General for examination (Opinion, PDF p. 2). 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 (Opinion, PDF pp. 3-4). 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 (Brief on the Merits (Preston Hollow Capital, LLC), PDF p. 19; Brief on the Merits (Public Finance Authority), PDF p. 19). ## Procedural History 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 (Opinion, PDF p. 4). The trial court granted Preston Hollow summary judgment on all claims and awarded it attorney's fees (Opinion, PDF p. 4). 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 (Opinion, PDF p. 4). 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 (Opinion, PDF pp. 1, 14). ## Issues Presented River Creek and the City present four issues (Brief on the Merits (Petitioner), PDF p. 11): 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. ## Standard(s) of Review 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 (Opinion, PDF pp. 5-6, 13-14). ## Legal Arguments **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 (Brief on the Merits (Petitioner), PDF p. 20). 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 (Reply to Response (Petitioner), PDF p. 6). **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 (Brief on the Merits (Preston Hollow Capital, LLC), PDF pp. 14, 36; Brief on the Merits (Public Finance Authority), PDF p. 9). 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 (Brief on the Merits (Public Finance Authority), PDF p. 19). **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 (Petition for Review (Petitioner), PDF p. 16; Brief on the Merits (Petitioner), PDF p. 20). **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 (Brief on the Merits (Preston Hollow Capital, LLC), PDF pp. 14, 36; Brief on the Merits (Public Finance Authority), PDF p. 9). **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 (Brief on the Merits (Petitioner), PDF p. 20). **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 (Brief on the Merits (Preston Hollow Capital, LLC), PDF p. 36). ## Stated Reasons the Court Should Take the Case 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 (Petition for Review (Petitioner), PDF p. 16). Respondents answered that the petition seeks to let a city declare its loan documents void while keeping the funds it received (Response to Petition (Respondent), PDF p. 10). ## Oral Argument - **Voidness.** Asked why voidness should be read into the statute, petitioners' counsel said other appellate courts treat contracts missing statutory requirements as illegal and void, which this Court has not decided. (Oral Argument, 0:03:17) - **Purpose of the statute.** Asked how a textualist court finds the statute's purpose, Preston Hollow's counsel said it provides a defense to validity, and if its criteria are not met the defense is unavailable. (Oral Argument, 0:32:06) - **Why no submission.** Asked why no Attorney General approval was sought, Preston Hollow's counsel said the city thought it unnecessary, and some transactions skip the extra benefit as a commercial judgment. (Oral Argument, 0:30:24; 0:33:09) - **Estoppel.** Asked why estoppel should not apply since seeking approval was the city's duty, petitioners' counsel said the city received no money and only took on a debt obligation. (Oral Argument, 0:37:29; 0:38:28) - **Who watches.** Asked who oversees these deals without Attorney General review, Preston Hollow's counsel said taxpayers or excluded competitors can sue, ideally early, before $17 million is spent. (Oral Argument, 0:17:23; 0:18:57) - **Authorized under section 431.070.** Asked for any argument that the note was not authorized under section 431.070, Preston Hollow's counsel said he could not fathom one and the transaction meets all three elements. (Oral Argument, 0:34:09) - **Windfall.** Asked why the city should get a windfall if it never requested submission, petitioners' counsel denied any windfall and said the city gets nothing. (Oral Argument, 0:05:08) - **Equitable remedies.** Asked whether a void ruling would leave Preston Hollow whole through quantum meruit, petitioners' counsel said not under existing law, citing the contractual-immunity amendments in Chapter 271. (Oral Argument, 0:42:05) ## Practice Area Tags financial-services ## Procedural Posture/Vehicle 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 (Opinion, PDF pp. 1, 4, 14). ## Amicus Involvement - [State of Texas (Office of the Attorney General)](https://search.txcourts.gov/SearchMedia.aspx?MediaVersionID=a26e1269-5320-4df7-ba5f-e06a3b570ac7&coa=cossup&DT=BRIEFS&MediaID=f579d979-bd8e-41a7-9e48-2416cad0d512) supports River Creek and the City: unapproved notes and contracts are invalid under the Transportation Code. - [Timothy G. Green](https://search.txcourts.gov/SearchMedia.aspx?MediaVersionID=9c87ca18-f631-4e8a-bd19-fac5a764b12e&coa=cossup&DT=BRIEFS&MediaID=a70836c2-da7d-4244-8233-dd1edca1f298) supports Respondents: conduit bond issuers are a significant part of Texas public finance, and none of the over one hundred such transactions in Texas has been reviewed by the Attorney General. ## Holding 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 (Opinion, PDF pp. 2, 5-7, 10-11). ## Court's Reasoning **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 (Opinion, PDF p. 6). 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 (Opinion, PDF p. 7). 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 (Opinion, PDF pp. 7-9). **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 (Opinion, PDF pp. 10-11). 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 (Opinion, PDF pp. 11-12). **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 (Opinion, PDF pp. 13-14). **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" (Hawkins, J., concurring in the judgment, PDF pp. 1-4). 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 (Hawkins, J., concurring in the judgment, PDF pp. 14-16). ## Disposition Court of appeals' judgment affirmed (Opinion, PDF p. 14). ## Vote Breakdown Justice Busby delivered the opinion of the Court, joined by Justices Lehrmann, Devine, Bland, Huddle, Young, and Sullivan (Opinion, PDF p. 1). Justice Hawkins concurred in the judgment, joined by Chief Justice Blacklock (Opinion, PDF p. 1). --- Source: The SCOTX Report, https://scotxreport.com/cases/24-1070. AI-generated summary of the Court's opinion, orders and the parties' briefs, with pin cites to the page of each document; verify against the Court's own documents at search.txcourts.gov.