Subcontractors sued a bank lender (JP Morgan) for withholding construction funds and misapplying trust money owed to them. The trial court ruled against the bank, but the appeals court reversed the decision. The court held that banks are exempt from Texas's Construction Trust Fund Act and cannot be sued by subcontractors for mishandling construction funds, even when the bank controls the money.
Banks that lend money for construction projects are legally exempt from Texas trust fund laws—you cannot sue them directly for withheld or misapplied funds
Focus your claims on the general contractor and project owner instead, as they remain liable for trust fund violations
Get clear written agreements about fund release procedures before work starts, since the lender's control over money is legally protected