In The Court of Appeals

Wachovia Bank, N.A., Respondent,


Winona Grain Co., Inc., and Michael Britton, Appellants.

Appeal From Florence County
 James E. Brogdon, Jr., Circuit Court Judge

Unpublished Opinion No. 2004-UP-482   
Submitted September 15, 2004 – Filed September 20, 2004


Michael S. Church, of Columbia, for Appellants.

Hamilton Osborne, Jr. and James Y. Becker, for Respondent.

PER CURIAM:  In this banking dispute brought by Respondent Wachovia Bank to collect on an outstanding note, Appellants Winona Grain Company and Michael Britton—the note’s borrower and guarantor, respectively—challenge the trial court’s dismissal of their counterclaim against Wachovia.  We affirm. [1]


In late 1997, Michael Britton, the principal manager of Winona Grain Company, a corporation in the business of buying and selling grain, met with Darren Bouknight, a loan officer for Wachovia Bank, to acquire capital for operating the business.  Through Bouknight, the bank agreed to extend two lines of credit to Winona, one in the amount of $750,000.00 and the other in the amount of $75,000.00. 

Wachovia secured the larger line of credit through a first priority lien on Winona’s South Carolina Department of Agriculture warehouse grain receipts and capped the amount of credit available to 80% of the value of the receipts.  To maintain this 80% margin, the loan’s commitment letter allowed Wachovia to demand partial repayment anytime grain devaluation caused the balance owed on the loan to exceed 80% of the value of the grain receipts.  If Wachovia made such a demand, the commitment letter gave Winona five business days to bring the amounts back within the 80% margin requirement.  Though the smaller line of credit had no corresponding margin requirement, Wachovia secured the smaller loan through a “[c]ontinuing first security interest in all non-receipted grain inventory, inventory, accounts receivable, and assignment of grain trading Margin Account.” 

The commitment letters for both loans contained cross-default clauses and established April 30, 1999 as the date when the lines of credit expired.  The commitment letters also contained the following terms:


Both Notes – At your company’s election, your company may prepay these Loans in whole or part without penalty.

. . . .

Disbursement and Conditions:

Both Notes – Funds are to be distributed to Winona Grain Co. Inc.’s business checking account at Wachovia Bank, N.A.

. . . .

The provisions of the commitment shall survive the Loan closing and shall be incorporated in the Loan documents so that a default by the Borrower of any such provision shall constitute a default under the Loan documents.

More than a week after agreeing to the terms of the commitment letters, Winona executed a Note and Security Agreement for both revolving lines of credit using the bank’s standard forms.  Both notes specifically incorporated the terms and conditions contained in the commitment letters and indicated the loans were due on demand.  The notes also included the following provision:

In addition, to the extent not prohibited by law, the Borrower hereby grants to the Lender a security interest in and security title to, and does hereby assign, pledge, transfer and convey to Lender . . . any balance or deposit accounts of the Borrower, whether such accounts be general or special, or individual or multiple party, and upon all drafts, notes, or other items deposited for collection or presented for payment by the Borrower with the Lender, and the Lender may at any time, without demand or notice, appropriate and apply any of such to the payment of any of the Obligations (except for Restricted Debt), whether or not due.

In the months following execution of the notes, Wachovia dispersed the requested funds from both lines of credit into Winona’s business checking account.  At some time in August, Bouknight telephoned Britton to tell him to deposit funds into Winona’s account to cover checks that had been presented for payment against the account that day.  Though Britton responded by making a deposit into Winona’s checking account, the deposit came in the form of an out-of-state check and was thus subject to Wachovia’s five-day hold policy for out-of-state checks.  As a consequence, the checks that prompted Bouknight’s telephone call were returned for insufficient funds. 

In October of 1998, because Winona had not given the South Carolina Department of Agriculture their audited financial statements, the Department withheld validation of Winona’s warehouse receipts.  Although Winona’s receipts lacked Department validation, Bouknight agreed to advance funds to Winona on the grain under the trust receipts.  Thus, while Winona collected the financial records required for Department validation, Wachovia made advancements of $40,000.00, $15,000.00, $75,000.00, and $8,000.00, with respective due dates of October 29, October 31, November 2, and November 5, 1998. 

On November 3, 1998, after the expiration dates for the first three trust receipts passed with no repayment from Winona, Wachovia applied $16,684.10 of Winona’s checking account against the larger line of credit.  Again on November 4, Wachovia applied an additional $21,042.06 of Winona’s account against the larger line of credit.  Over the same two days, Wachovia returned 12 checks on Winona’s account unpaid. 

On November 12, 1998, the Department of Agriculture validated Winona’s warehouse receipts, thereby providing adequate security for the larger line of credit.  Shortly thereafter, with the loan no longer under-collateralized, Wachovia made advancements of $145,000.00 and $300,000.00 on the larger line of credit, though Wachovia applied $45,000.00 of the advanced funds against the outstanding amount on the smaller line of credit. 

Over the next two months, Wachovia returned 19 checks on Winona’s account for insufficient funds.  Thereafter, Wachovia brought this action against Winona for claim and delivery and recovery on the notes.  Wachovia also sought to recover against Britton on his personal guarantee.  Winona asserted setoff as a defense and counterclaimed for wrongful dishonor of checks presented for payment against Winona’s checking account. 

Prior to the trial on the merits, the trial court granted Wachovia’s motion for summary judgment on its claims against Winona and Britton for the balance due on the notes in the amount of $54,916.75.  With only Winona’s counterclaims remaining, a trial was commenced before a jury on November 18, 2002.  After Winona presented its evidence, Wachovia moved for directed verdict.  After hearing argument, the trial court granted Wachovia’s directed verdict motion as to all causes of action.  This appeal follows.


Motions for directed verdict require the trial judge to view the evidence in the light most favorable to the non-moving party.  This court will reverse the trial court only when there is no evidence to support the ruling below. Steinke v. South Carolina Dept. of Labor, Licensing and Regulation, 336 S.C. 373, 520 S.E.2d 142 (1999). 


I.      Wrongful Dishonor

Winona contends the trial court erred in directing a verdict against its counterclaim for wrongful dishonor because the loan agreement with Wachovia was ambiguous and unconscionable.  We disagree.

A bank owes a general duty to each customer to honor checks drawn on his or her account if the customer’s account has sufficient funds to cover the item presented.  St. Charles Mercantile Co. v. Armour & Co., 156 S.C. 397, 405, 153 S.E. 473, 477 (1930) (“It was the duty of the bank, when a check which properly demanded payment was presented, to make payment, if the drawer had sufficient funds to meet it.”).  Rather than contending the company’s checking account had sufficient funds to cover each of the dishonored checks, Winona argues that the account’s reoccurring insufficiencies were due to Wachovia’s improper conduct, not its own. 

Specifically, Winona argues Wachovia was required to immediately credit Winona’s account for all deposits, and when Wachovia placed a five-day hold on the deposit of an out-of-state check for $80,000.00, Wachovia wrongfully caused an insufficiency that resulted in two checks being returned on August 10, 1998.  To support their position that Wachovia was bound to give immediate credit for all deposits—a requirement not found in the loan documents—Winona contends that because Wachovia had previously given Winona immediate credit on deposits, they established a course of dealing that Wachovia was bound to continue.  This argument finds no support in our law.  Courts do not look to the course of dealing between parties as a tool for inserting new obligations among those made explicit by the terms of a written agreement.  Rather, courts draw upon parties’ dealings only when necessary to acquire an improved understand of the meaning the parties intended by using particular words or expressions in a subsequent written agreement.  Thus, course of dealing evidence is used to aid to contract interpretation, not to show contract augmentation.  See Columbia Nitrogen Corp. v. Royster Co., 451 F.2d 3, 9 (4th Cir. 1971) (“[E]vidence of usage of trade and course of dealing should be excluded whenever it cannot be reasonably construed as consistent with the terms of the contract.”); Wolfe v. Herlihy, 218 S.C. 90, 95, 61 S.E.2d 764, 767-68 (1950) (“The testimony shows that this payment was tendered in full conformity with the construction placed upon the ambiguous provisions of the lease by the parties themselves through their long course of dealing.”). 

Ambiguities or conflicts in documents constituting contract must be construed against the party who prepared the contract. Mid-Continent Refrigerator Co. v. Way, 263 S.C. 101, 208 S.E.2d 31 (1974); Southern Atlantic Financial Services, Inc. v. Middleton, 349 S.C. 77, 562 S.E.2d 482 (Ct. App. 2002).  Identical repayment provisions of both commitment letters state, “[b]orrower shall repay all or any part of the amount committed on such dates as it may determine…” Winona asserts these provisions, coupled with the ability to prepay without penalty, conflict with Wachovia’s right under the notes to require payment at any time.  These two provisions, however, merely allow either party to elect at any time to extinguish the debt.  No ambiguity results from these terms.   

Winona also argues that the court should give more weight to the typed commitment letters than to the printed notes.  This rule, however, only applies when the documents create an inconsistency and because the trial judge correctly found no ambiguity in the documents, this argument is without merit.  See 17A Am. Jur. 2d Contracts § 395 (2002).

As such, even though Wachovia had immediately credited previous deposits, both parties’ responsibilities and obligations remained the same as outlined in their written agreement.

Winona next argues Wachovia was required to make automatic advances from the lines of credit to cover overdrafts on the Winona account.  If Wachovia had made such automatic advances, Winona argues, the balance in the checking account would have been sufficient to cover certain checks Wachovia dishonored.  Although no written agreement between Wachovia and Winona mentions automatic overdraft coverage, Winona relys exclusively on Britton’s own testimony about an alleged oral agreement made with Bouknight.  Winona’s reliance is misplaced.  The parol evidence rule bars the introduction of extrinsic evidence to modify or contradict the terms of an integrated written agreement.  Levy v. Outdoor Resorts, 304 S.C. 427, 432, 405 S.E.2d 387, 390 (1991).  As a matter of substantive law, therefore, Britton’s testimony cannot modify the explicit terms of the parties’ written agreement.

Winona further argues that Wachovia wrongfully dishonored two $30,000.00 checks that Winona drew on its account at Wachovia Bank and then deposited into Winona’s account at Pee Dee Federal Savings Bank.  Winona contends that although Wachovia later tendered a cashier’s check to satisfy the dishonored checks, the subsequent tender did not retroactively ameliorate the account’s previous insufficiency. 

As the forgoing makes clear, Winona has adduced no evidence to show it had sufficient funds in its account to satisfy the checks dishonored by Wachovia.  Further, Winona’s allegations of wrongdoing by Wachovia all fail as a matter of law.  Accordingly, the trial court committed no error in granting Wachovia’s directed verdict motion on Winona’s counterclaims. 

II.    Setoff

As its final issue on appeal, Winona argues the trial court erred in granting Wachovia’s motion for summary judgment because the defense of setoff asserted by Winona created factual issues as to the amount of indebtedness owed under the notes.  We disagree.

Rather than contesting facts germane to Wachovia’s claim, Winona, in effect, asserts that the mere existence of its counterclaim allows for the possibility of a right of setoff, thereby precluding the trial court from granting summary judgment.  As the trial court correctly noted, “the mere existence of this potential right of setoff does not create a genuine issue of material fact.”  With no genuine dispute as to the material facts of Wachovia’s claim, the trial court committed no error in granting summary judgment.



[1] We decide this case without oral argument pursuant to Rule 215, SCACR.