Travel Services Network v. Presidential Financial Corp.

Travel Services Network, Inc. (TSN) (plaintiff) acquired and operated travel agencies. On June 23, 1992, TSN entered into a secured loan agreement with Presidential Financial Corporation of Massachusetts (Presidential) (defendant) for a line of credit of $250,000 in order to finance the purchase of Kaplan Travel Bureau (Kaplan). The loan agreement granted Presidential the right to advance funds in its sole discretion and waived TSN rights to “demand, presentment, notice, protest, and notice of dishonor.” The parties thereafter executed an escrow agreement to establish a special account to finance the purchase of Kaplan, but the escrow agreement did not require Presidential to disburse the $250,000 contemplated; TSN instead relied on Presidential’s oral promises, but no such funds were ever advanced under the escrow agreement. Presidential did, however, advance funds under the loan agreement. On February 19, 1993, Presidential informed TSN that it was in default of the loan agreement and that it would no longer advance funds under the loan agreement until Presidential was satisfied that TSN could honor its outstanding obligations to another creditor whose agreement TSN was in default. TSN terminated its relationship with Presidential shortly thereafter, and TSN entered into a new, less favorable financing arrangement that resulted in its demise. TSN brought suit against Presidential for breach of the implied covenant of good faith and fair dealing, among other claims, arguing that Presidential: (1) failed to provide reasonable notice of its intention to restrict or terminate the line of credit; (2) provided false assurances to direct inquiries of TSN that its line of credit was in no danger; and (3) failed to adhere to oral promises to advance funds under the escrow agreement for the purchase of Kaplan. Presidential moved for summary judgment on each claim.