## Facts

- A travel-agency acquisition company obtained secured revolving financing from a commercial lender under a written loan and security agreement and a demand note.
- Advances were capped as a percentage of specified accounts receivable, required first-priority security interests, required customer payments to be remitted directly to the lender, and gave the lender sole discretion over whether and when to advance funds.
- Before closing on a target travel-agency acquisition, the parties executed an escrow agreement; the borrower alleged oral promises that the lender would provide a $250,000 lump-sum at closing, but the escrow agreement did not require that disbursement.
- No escrow funds were advanced at closing; the lender later made revolving advances under the written loan agreement.
- The credit line was later increased to support expansion, then reduced after the lender raised concerns about the quality and sufficiency of collateral and the borrower’s financial condition.
- The lender sent a notice of default and stated it would stop advancing funds until certain conditions were satisfied.
- The borrower alleged the lender gave false assurances that the credit line was secure and would continue, causing the borrower to delay seeking alternative financing and suffer business losses.

## Issues

1. Whether alleged oral promises to fund a lump-sum advance at closing were enforceable despite unambiguous written loan/escrow documents and applicable statute-of-frauds and parol-evidence limits.
2. Whether the lender’s restriction and termination of advances, coupled with alleged assurances about continued funding, could breach the implied covenant of good faith and fair dealing even where the contract gave the lender discretion.
3. Whether the lender’s alleged assurances about the security and continuation of the credit line could support negligent and fraudulent misrepresentation claims.
4. Whether an arm’s-length lender–borrower relationship created fiduciary duties, and whether a Connecticut unfair-trade-practices claim was barred by a contractual Massachusetts choice-of-law provision.

## Decision

- Summary judgment was granted for the lender on contract claims premised on alleged oral funding promises inconsistent with the written agreements.
- Summary judgment was denied on the borrower’s claim for breach of the implied covenant of good faith and fair dealing.
- Summary judgment was denied on negligent misrepresentation and fraudulent misrepresentation claims based on alleged assurances about the credit line’s security and continuation.
- Summary judgment was granted for the lender on the fiduciary-duty claim.
- Summary judgment was granted for the lender on the Connecticut unfair-trade-practices claim based on enforcement of the Massachusetts choice-of-law provision.

## Legal Principles

- Written commercial loan documents control; alleged oral commitments that contradict or add to unambiguous written terms are generally unenforceable under statute-of-frauds and parol-evidence rules.
- A contractual grant of discretion (including discretion over advances) does not eliminate the implied covenant of good faith and fair dealing; a party may not exercise discretion in bad faith to deprive the other party of the contract’s benefits.
- Assurances about future lending conduct may create triable misrepresentation claims where evidence supports falsity or misleading omission, culpable mental state (knowledge or lack of reasonable care), reasonable reliance, and causation.
- An arm’s-length commercial lender–borrower relationship, without a special relationship of trust and confidence, does not create fiduciary duties.
- Contractual choice-of-law provisions may bar statutory unfair-trade-practices claims under another state’s law when the dispute falls within the provision’s scope.

## Conclusion

The court enforced the written financing documents to reject contract theories based on alleged oral funding promises and dismissed fiduciary-duty and Connecticut statutory claims, but it allowed the case to proceed on implied-covenant and misrepresentation theories arising from alleged lender assurances about continued availability of credit.


Travel Servs. Network, Inc. v. Presidential Fin. Corp. of Mass., 959 F. Supp. 135 (D. Conn. 1997)