Court Opinion

ID: 9894740
Source: CourtListenerOpinion
Date Created: 2023-11-02 18:07:01.590189+00
Date Added: 2024-06-11T09:10:29.353455
License: Public Domain

Wildewood Operating Company, LLC v. WRV Holdings, LLC, et al., No. 388, September Term
2022. Opinion by Tang, J.

PRINCIPAL AND SURETY – REMEDIES OF CREDITORS – CONDITIONS
PRECEDENT TO ACTION AGAINST SURETY – NOTICE AND DEMAND

Although performance bond language lacked explicit timely notice requirement, language is
read as requiring obligee owner to timely notify surety of default and termination of
construction contract before third party took over remedial work. To read otherwise would
render meaningless surety’s rights to exercise mitigation options under bond.

PRINCIPAL AND SURETY – NATURE AND EXTENT OF LIABILITY OF SURETY
– PERFORMANCE OF CONTRACT OR CONDITIONS BY CREDITOR

PRINCIPAL AND SURETY – DISCHARGE OF SURETY – NEGLECT TO GIVE
NOTICE TO SURETY OF DEFAULT – EFFECT OF OMISSION OR DELAY

Obligee owner’s failure to provide timely notice to surety of obligor contractor’s default and
termination of construction contract before third party took over remedial work deprived
surety of its right to participate in curing contractor’s default under performance bond,
discharging surety of liability under bond.

PRINCIPAL AND SURETY – REMEDIES OF CREDITORS – CONDITIONS
PRECEDENT TO ACTION AGAINST SURETY – NOTICE AND DEMAND

Requirement in provision of performance bond to demonstrate actual prejudice when obligee
owner fails to comply with notice requirement governing intent to declare contractor’s default
did not apply to separate notice requirement governing declaration of contractor’s default and
termination of construction contract.

PRINCIPAL AND SURETY – RIGHTS AND REMEDIES OF SURETY – AS TO
CREDITOR

Surety suffered prejudice as a matter of law when it was deprived of its contractually agreed-
upon rights to exercise mitigation options under performance bond.
   Circuit Court for St. Mary’s County
   Case No. C-18-CV-17-000118

                                                                                  REPORTED

                                                                        IN THE APPELLATE COURT

                                                                               OF MARYLAND

                                                                                    No. 388

                                                                             September Term, 2022

                                                                   WILDEWOOD OPERATING COMPANY, LLC

                                                                                       v.

                                                                        WRV HOLDINGS, LLC, ET AL.

                                                                      Beachley,
                                                                      Tang,
                                                                      Kehoe, Christopher B.*

                                                                                       JJ.

                                                                              Opinion by Tang, J.
   Pursuant to the Maryland Uniform Electronic Legal Materials
   Act (§§ 10-1601 et seq. of the State Government Article) this
   document is authentic.

                   2023-11-02 13:30-04:00
                                                                      Filed: October 30, 2023

   Gregory Hilton, Clerk

* Kehoe, Christopher B., now retired, participated in the hearing of this case while an active
member of this Court; after being recalled pursuant to the Constitution, Article IV, Section
3A, he also participated in the decision and the preparation of this opinion.
       This appeal concerns a surety’s obligations under a construction performance bond.

Wildewood Operating Company, LLC (“Wildewood Operating”), appellant, filed a

complaint against First Indemnity of America Insurance Company (“First Indemnity”),

appellee, for breach of a performance bond, in which it sought from First Indemnity

indemnification for an amount incurred to complete construction after the contractor

defaulted. 1 First Indemnity moved for summary judgment, arguing that it was discharged

of liability under the bond. The Circuit Court for St. Mary’s County granted the motion,

and Wildewood Operating appealed. For the reasons set forth below, we affirm the

judgment of the circuit court.

                                 FACTUAL BACKGROUND

       In January 2013, Wildewood Operating purchased from WRV Holdings, LLC

(“WRV”) a parcel of land located in St. Mary’s County, with the intention of constructing

an assisted living facility (the “Facility”). Pursuant to the sales contract, WRV allowed

Wildewood Operating to perform site work on WRV’s adjacent parcel necessary for the

construction of the Facility. The work included, inter alia, the construction of a submerged

gravel wetland (“SGW”) to manage stormwater.

       In conjunction with the sale, Wildewood Operating entered into a contract with

Clark Turner Construction, LLC (“Clark Turner”) for the construction of the Facility,

including SGW and other bioretention facilities. The construction contract required Clark

       1
         Wildewood Operating also sued WRV Holdings, LLC for unjust enrichment, but
the claim was disposed of by summary judgment and is not the subject of this appeal.
Turner to substantially complete the work no later than one year from the date of

commencement.

      First Indemnity issued a performance bond set forth in a standard, American

Institute of Architects (“AIA”) form A312 (2010) (the “Bond”). 2 The Bond refers to Clark

Turner as “Contractor,” Wildewood Operating as “Owner,” and First Indemnity as

“Surety.” The Bond incorporates by reference the construction contract and outlines

Wildewood Operating’s obligation to notify First Indemnity in the event of Clark Turner’s

default. The notice requirements provide:

      § 3 If there is no Owner Default under the Construction Contract, the
          Surety’s obligation under this Bond shall arise after

            .1 the Owner first provides notice to the Contractor and the Surety that
               the Owner is considering declaring a Contractor Default. Such
               notice shall indicate whether the Owner is requesting a conference
               among the Owner, Contractor and Surety to discuss the Contractor’s
               performance. If the Owner does not request a conference, the Surety
               may, within five (5) business days after receipt of the Owner’s
               notice, request such a conference. If the Surety timely requests a
               conference, the Owner shall attend. Unless the Owner agrees
               otherwise, any conference requested under this Section 3.1 shall be
               held within ten (10) business days of the Surety’s receipt of the
               Owner’s notice. If the Owner, the Contractor and the Surety agree,
               the Contractor shall be allowed a reasonable time to perform the
               Construction Contract, but such an agreement shall not waive the
               Owner’s right, if any, subsequently to declare a Contractor Default;

            .2 the Owner declares a Contractor Default, terminates the
               Construction Contract and notifies the Surety; and

      2
        The AIA is an organization that, among other things, “[s]ets the industry standard
in contract documents with more than 100 forms and contracts used in the design and
construction industry.” Schneider Elec. Bldgs. Critical Sys., Inc. v. W. Sur. Co., 231 Md.
App. 27, 34 n.3 (2016) (citation omitted).

                                            2
           .3 the Owner has agreed to pay the Balance of the Contract Price in
              accordance with the terms of the Construction Contract to the Surety
              or to a contractor selected to perform the Construction Contract.

      § 4 Failure on the part of the Owner to comply with the notice requirement
          in Section 3.1 shall not constitute a failure to comply with a condition
          precedent to the Surety’s obligations, or release the Surety from its
          obligations, except to the extent the Surety demonstrates actual
          prejudice.

      Section 5 of the Bond describes the election of remedies available to First Indemnity

upon satisfaction by Wildewood Operating of the notice requirements:

      §5     When the Owner has satisfied the conditions of Section 3, the Surety
      shall promptly and at the Surety’s expense take one of the following actions:

      § 5.1 Arrange for the Contractor, with the consent of the Owner, to perform
      and complete the Construction Contract;

      § 5.2 Undertake to perform and complete the Construction Contract itself,
      through its agents or independent contractors;

      § 5.3 Obtain bids or negotiated proposals from qualified contractors
      acceptable to the Owner for a contract for performance and completion of
      the Construction Contract, arrange for a contract to be prepared for execution
      by the Owner and a contractor selected with the Owner’s concurrence, to be
      secured with performance and payment bonds executed by a qualified surety
      equivalent to the bonds issued on the Construction Contract, and pay to the
      Owner the amount of damages as described in Section 7 in excess of the
      Balance of the Contract Price incurred by the Owner as a result of the
      Contractor’s Default; or

      § 5.4 Waive its right to perform and complete, arrange for completion, or
      obtain a new contractor and with reasonable promptness under the
      circumstances:

             .l After investigation, determine the amount for which it may be
                liable to the Owner and, as soon as practicable after the amount is
                determined, make payment to the Owner; or

             .2 Deny liability in whole or in part and notify the Owner, citing the
                reasons for denial.

                                            3
       Clark Turner did not construct SGW and certain bioretention facilities in accordance

with the construction contract. In February 2014, the St. Mary’s County Soil Conservation

District Board declared the site out of sequence and required that the site come into

compliance by March 2014. Clark Turner, however, did not complete the work necessary

to bring the site into compliance.

       In July 2014, Wildewood Operating contracted to sell the Facility to an unrelated

entity, Wildewood Owner, LLC (“Wildewood Owner”). The closing was scheduled for

November 24, 2014. One of the requirements for the sale was Wildewood Operating’s

representation and warranty to Wildewood Owner that, at the time of closing, no

government approvals were still needed, and construction had been completed in

compliance with all applicable laws affecting the property.

       As of November 2014, Clark Turner still had not properly constructed SGW. Nor

had it obtained the necessary government approvals for the work. As a result, Wildewood

Operating, Clark Turner, WRV, and Wildewood Owner, among others, entered into a work

agreement (“Work Agreement”), dated November 20, 2014, to ensure completion of the

work on WRV’s parcel. The Work Agreement required Clark Turner to complete the work

by June 1, 2015, to allow for approval from the County by June 30, 2015.

       Pursuant to the Work Agreement, Wildewood Operating provided a letter of credit

in the amount of $150,000 in favor of WRV, under which WRV could draw down if Clark

Turner defaulted on its obligations to complete the work. The Work Agreement further

provided that if approval from the County was not obtained by the deadline, the work “shall

                                            4
become the sole property” of WRV, and WRV “shall be solely responsible” for the

completion of the work. First Indemnity was not a party to the Work Agreement.

      Clark Turner failed to complete the work pursuant to the Work Agreement, and

WRV demanded and received $150,000 under the letter of credit. Using those proceeds,

WRV retained and paid Binnacle, LLC (“Binnacle”), as project manager, to complete the

defaulted work. Binnacle completed the work by October 2015 and obtained all necessary

government approvals.

      By letter dated November 3, 2015, Wildewood Operating notified First Indemnity

that it was considering declaring Clark Turner in default. Wildewood Operating advised

First Indemnity, for the first time, that Clark Turner had failed to achieve substantial

completion of the work under the construction contract by December 2013, nor did it

achieve final completion by February 2014. Wildewood Operating also informed First

Indemnity that Wildewood Operating had sold the property to Wildewood Owner;

Wildewood Operating had entered into the Work Agreement; Wildewood Operating had

established a letter of credit in WRV’s favor; Clark Turner had continued to default; and

WRV had drawn down on the letter of credit.

      After a conference with First Indemnity, Wildewood Operating notified First

Indemnity, by letter dated November 20, 2015, that it declared Clark Turner in default

under the construction contract and terminated that contract. 3 Wildewood Operating stated

that it “ha[d] now met the conditions of Section 3 of the Bond[,]” and it “demand[ed] that

      3
          By that time, Clark Turner had filed for bankruptcy.

                                             5
[First Indemnity] promptly take action in accordance with Section 5 of the Bond.” First

Indemnity denied Wildewood Operating’s claim.

                              PROCEDURAL HISTORY

       In August 2017, Wildewood Operating filed a complaint against First Indemnity,

alleging that First Indemnity breached the terms of the Bond, and sought $150,000 in

damages.

       First Indemnity moved for summary judgment on two bases. First, it argued that its

obligations to perform under the Bond were discharged because Wildewood Operating

entered into a new contract (the Work Agreement) that superseded the construction

contract. Second, First Indemnity argued that Wildewood Operating’s notification of Clark

Turner’s default and termination after a third party (WRV/Binnacle) had completed the

defaulted work breached the Bond’s condition precedent and precluded First Indemnity

from exercising its rights and remedies under Section 5. This preclusion, First Indemnity

argued, constituted prejudice as a matter of law.

       Wildewood Operating opposed the motion. As to First Indemnity’s first basis,

Wildewood Operating argued that the Work Agreement did not modify First Indemnity’s

obligations under the construction contract, nor did it supersede the contract. Rather, the

Work Agreement merely extended the deadline for Clark Turner to complete the work and

thus did not discharge First Indemnity of its obligation to indemnify Wildewood Operating

under the Bond. As to First Indemnity’s second basis, Wildewood Operating responded

that First Indemnity did not demonstrate “actual prejudice” under Section 4. It argued that

disputes of material fact in that regard warranted denial of the motion.

                                             6
      At the motions hearing, First Indemnity reiterated the two alternate bases for

granting the motion, emphasizing that the second basis was “an even clearer” argument for

summary judgment in its favor. At the conclusion of the hearing, the court granted

summary judgment in favor of First Indemnity. Focusing on the second basis, the court

determined that, because the defaulted work “was already completed” by the time

Wildewood Operating provided notice of Clark Turner’s default and termination, First

Indemnity was deprived of its right to elect a remedy under Section 5 of the Bond, which

resulted in “inherent prejudice” to First Indemnity. As to the other basis, the court

concluded that First Indemnity was discharged of its obligations under the Bond when

Wildewood Operating entered into the Work Agreement.

                                 ISSUES PRESENTED

      On appeal, Wildewood Operating challenges the bases on which the court granted

summary judgment. 4 For clarity, we rephrase the issues as follows:

      1. Did the court err in granting summary judgment in favor of First
         Indemnity on the basis that First Indemnity was prejudiced when
         Wildewood Operating notified First Indemnity of the contractor’s default
         and termination after a third party had remedied the defaulted work?

      4
          The questions raised by Wildewood Operating in its brief are:

      A. Did the Circuit Court err in finding there were no material facts at issue
         in the case where there were factual issues as to whether the Work
         Agreement modified First Indemnity’s obligations to Wildewood
         [Operating] and whether First Indemnity had demonstrated actual
         prejudice?

      B. Did the Circuit Court err in finding the work agreement superseded the
         construction contract?
                                            7
       2. Did the court err in granting summary judgment in favor of First
          Indemnity on the basis that the Work Agreement discharged First
          Indemnity of its obligations under the Bond?

       As to the first question, we hold that the circuit court did not err. Accordingly, we

do not address whether summary judgment was properly granted on the alternate basis.

                                 STANDARD OF REVIEW

       “In reviewing a grant of summary judgment under Md. Rule 2-501, we

independently review the record to determine whether the parties properly generated a

dispute of material fact and, if not, whether the moving party is entitled to judgment as a

matter of law.” Myers v. Kayhoe, 391 Md. 188, 203 (2006). “The question of whether a

trial court’s grant of summary judgment was proper is a question of law subject to de

novo review on appeal.” Id. “We review the record in the light most favorable to the

nonmoving party and construe any reasonable inferences that may be drawn from the facts

against the moving party.” Id.

                              PARTIES’ CONTENTIONS

       Wildewood Operating argues that the circuit court erred in granting summary

judgment because disputes of material fact exist as to whether First Indemnity suffered

“actual prejudice” under Section 4 of the Bond. It emphasizes that Section 4 requires that

First Indemnity demonstrate “actual prejudice,” and even if such demonstration is made,

First Indemnity’s obligation would be reduced only “to the extent” of the prejudice shown.

       Wildewood Operating acknowledges that the requirement to demonstrate “actual

prejudice” applies when the owner fails to comply with the notice requirement in Section

3.1 (notice “considering declaring” a default), not when the owner fails to comply with the

                                             8
notice requirement in Section 3.2 (notice of default and termination of the construction

contract). But it maintains that it complied with the notice requirement in Section 3.2, and

First Indemnity is not absolved from demonstrating actual prejudice.

       First Indemnity responds that Wildewood Operating did not comply with the

condition precedent necessary to trigger First Indemnity’s obligations under the Bond when

notification of Clark Turner’s default and termination was provided after the defaulted

work had been remedied by a third party. It contends that, because Wildewood Operating

did not satisfy the condition precedent, First Indemnity is discharged from performing

under the Bond. Regardless of whether the “actual prejudice” requirement applies to

Sections 3.1 or 3.2, First Indemnity asserts that it was prejudiced as a matter of law when

it was precluded from exercising its options under Section 5.

                                       DISCUSSION

       In the construction industry, bonding is essential to ensure completion of a

contracted-for project in the event of a contract party’s default. See Peter A. Alces & Susan

Sieger-Grimm, The Law of Suretyship and Guaranty § 10:1 (June 2023). A surety bond is

a “tripartite agreement among a principal obligor [i.e., the contractor], his obligee [i.e., the

owner], and a surety.” Nat’l Union Fire Ins. Co. v. David A. Bramble, Inc., 388 Md. 195,

205 (2005) (citations omitted). It is a “three party arrangement intended to provide

personal security for the payment of a debt or performance of an obligation.” Id. (citation

omitted). A surety, in other words, is “[a] person who binds himself for the payment of a

sum of money, or for the performance of something else, for another.” Id. at 205–06

(citation omitted).

                                               9
       While there are various forms of construction surety bonds, our focus is on the

performance bond. “[T]he purpose and intent of the performance bond generally is to

protect the named obligee against the contractor’s default[.]” Philip L. Bruner & Patrick J.

O’Connor, Jr., 4A Bruner and O’Connor on Construction Law § 12:14 (August 2023)

(“Bruner & O’Connor”). “In a performance bond context, the surety assures the obligee

that if the principal fails to perform its contractual duties, the surety will discharge the

duties itself[.]” Atl. Contracting & Material Co. v. Ulico Cas. Co., 380 Md. 285, 300

(2004).

       “[T]he surety’s performance obligation customarily is offered in various

expressions, such as performance of the contract and payment for labor and materials

furnished in furtherance of the contract, protection of the land against the filing of

mechanics’ liens, indemnification of the obligee against loss caused by the contractor’s

failure to perform, or completion of the contract unconditionally.” Bruner & O’Connor, §

12:14; see Atl. Contracting, 380 Md. at 299 (expressions of the surety’s obligation can be

“performing [the defaulted contractual duties] or paying the obligee the excess costs of

performance”).

       “A surety bond is a contract and is to be construed as such.” John McShain, Inc. v.

Eagle Indem. Co., 180 Md. 202, 205 (1942). The bond must be construed in accordance

with traditional rules of objective contract interpretation, meaning the clear and

unambiguous language of the bond is controlling. See Nat’l Union Fire Ins. Co. v.

Wadsworth Golf Constr. Co., 160 Md. App. 257, 268–69 (2004). It follows that “the

liability of a surety is not to be extended, by implication, beyond the terms of [its] contract.”

                                               10
Mayor & City Council of Balt. v. Fid. & Deposit Co., 282 Md. 431, 441 (1978) (“To the

extent, and in the manner, and under the circumstances pointed out in [its] obligation, [it]

is bound, and no farther.”). “Where the contract incorporates as a part of itself the

specifications, and the contract is, by reference, incorporated as a part of the bond, the

contract, the specifications, and the bond must all be construed together.” Lange v. Bd. of

Educ. of Cecil Cnty., 183 Md. 255, 261 (1944).

       Generally, notice of the obligor’s default triggers the surety’s obligations under the

performance bond. Bruner & O’Connor, § 12:13. Once triggered, the bond typically

provides the surety with various remedial options. Id. § 12:15. “The purpose of the obligee

giving the surety ‘notice of default’ is to permit the surety to review its options under the

bond in order to minimize its liability.” Id. § 12:36.

       Where the surety’s performance bond options include contract completion
       by takeover, tender, or financing of the principal, timely notice of default is
       an essential prerequisite to the surety’s contract completion obligation and
       loss mitigation efforts. Lack of proper and timely notice of default to a
       performance bond surety having such options has resulted in discharge of the
       surety’s bond liability.

Id. (footnote omitted and emphasis added).

       The AIA form 312 performance bond, the bond at issue here, “is one of the clearest,

most definitive, and widely used type of traditional common law ‘performance bonds’ in

private construction.” Id. § 12:16 (citations omitted). “The form was developed to define

clearly the scope and extent of the surety’s liability, the ‘trigger’ of the surety’s obligation

to perform, the options available to the surety in satisfying its bond obligations, and the

duration of the surety’s obligations.” Id.

                                              11
       The owner must satisfy all of [the Section 3] conditions.[5] To trigger the
       surety’s obligations, the owner must not itself be in default and must properly
       follow the contract termination procedure after giving the contractor and
       surety whatever opportunity to “cure” the deficiencies upon which the owner
       relies to terminate the bonded contract that are mandated by the contract
       documents and the applicable law.

Id. (footnotes omitted).

       A condition precedent is “a fact, other than mere lapse of time, which, unless

excused, must exist or occur before a duty of immediate performance of a promise arises[.]”

Chirichella v. Erwin, 270 Md. 178, 182 (1973) (citation omitted). Although no particular

words are necessary to create an express condition, certain words and phrases—i.e., “if,”

“provided that,” “when,” “after,” “as soon as,” and “subject to”—are used to indicate

that performance has been expressly made conditional. Hartford Fire Ins. Co. v.

Himelfarb, 355 Md. 671, 680 (1999). Wildewood Operating acknowledges that Section 3

of the Bond enumerates certain conditions precedent.

       “Generally, when a condition precedent is unsatisfied, the corresponding

contractual duty of the party whose performance was conditioned on it does not

arise.” Chesapeake Bank v. Monro Muffler/Brake, Inc., 166 Md. App. 695, 708 (2006)

(citation omitted); Laurel Race Course, Inc. v. Regal Constr. Co., 274 Md. 142, 154 (1975)

(“[T]here is no duty of performance and there can be no breach by nonperformance until

       5
         The AIA updated an earlier, 1984 version of the form A312 bond in what is now
embodied in the 2010 version. Under Section 3.1 of the 2010 version, “the owner’s request
of a conference is no longer a ‘condition precedent’ to triggering the surety’s liability[.]”
Bruner & O’Connor, § 12:16 n.4. Notwithstanding the change, “[t]he obligee’s declaration
of contractor default and formal termination of the contractor’s right to proceed remain the
crucial conditions precedent to the surety’s performance bond liability.” Id.

                                             12
the condition precedent is either performed or excused.”) (citations omitted). Thus, if the

obligee fails to perform a condition precedent in the performance bond, the surety is not

required to perform under the bond. See Miller Lumber Indus., Inc. v. Brown, 46 Md. App.

399, 409 (1980) (reversing grant of summary judgment in favor of obligee where condition

precedent in the performance bond was not performed by obligee).

      While our courts have not addressed the issue presented, decisions by courts in other

jurisdictions provide compelling and persuasive authority in support of affirmance. In

Western Surety v. United States Engineering Construction, LLC, 955 F.3d 100 (D.C. Cir.

2020), the United States Court of Appeals for the District of Columbia Circuit addressed

the notice requirements under Section 3 and the “actual prejudice” requirement under

Section 4 of the A312 (2010) performance bond. The case involved the construction of a

new South African embassy in Washington, D.C. Id. at 101. A contractor/obligee entered

into a subcontract with a subcontractor/obligor to perform sheet metal work. Id. The

contractor obtained the bond from the surety in which the surety and subcontractor bound

themselves to ensure the work under the subcontract was completed. Id.

      When the subcontractor failed to complete the work, the contractor declared the

subcontractor in default and terminated the subcontract. Id. at 102. The contractor,

however, did not notify the surety of the default and termination until about nine months

after the termination occurred. Id. at 102–03. By that time, the contractor had arranged

for the completion of the defaulted work without the surety’s knowledge. W. Sur. Co. v.

U.S. Eng’g Co., 375 F. Supp. 3d 1, 3 (D.D.C. 2019).

                                            13
       The surety filed suit against the contractor, seeking, inter alia, a declaration that the

surety’s obligations under the bond had been discharged because of the contractor’s

“extreme delay” in providing notice to the surety of the subcontractor’s default and

termination. W. Sur. Co., 955 F.3d at 103. The surety moved for summary judgment,

asserting that the contractor failed to comply with a condition precedent, thereby relieving

the surety of any liability. Id. at 101. The district court granted summary judgment in the

surety’s favor. Id. at 103.

       On appeal, the D.C. Circuit affirmed, holding that the surety was not obligated to

perform under the bond because the contractor provided late notice of default and

termination.   Id. at 105.    Notwithstanding the absence of an express timely notice

requirement in Section 3.2, the court held that the obligee must provide timely notice to

the surety of any default and termination before it elects to remedy the default on its own

terms. Id. at 104–05. It explained:

       [T]he A312 bond provides four alternative methods by which the surety can
       respond to the default. By unilaterally completing [the subcontractor’s]
       remaining contract obligations before notifying [the surety], [the contractor]
       deprived [the surety] of its contractually agreed-upon opportunity to
       participate in remedying [the subcontractor’s] default.

       To be sure, under several provisions of the bond, [the surety] could not have
       responded to the default without [the contractor’s] consent. But even so, that
       limitation did not give [the contractor] the right to address the situation
       without consulting [the surety] and then recover under the bond nine months
       later. In other words, despite the bond’s lack of an explicit timely notice
       requirement, the performance bond is properly read as requiring [the
       contractor] to notify [the surety] of the default before engaging in self-help
       remedies. Otherwise, “the explicit grant to the surety of a right to remedy the
       default itself would be operative only if the obligee [the contractor] chose to
       give it notice,” thereby rendering the options in [S]ection 5 “nearly
       meaningless.” Accordingly, because the bond expressly provides the surety

                                              14
       with the opportunity to participate in curing the subcontractor’s default, we
       hold that it is a condition precedent to the surety’s obligations under the bond
       that the owner must provide timely notice to the surety of any default and
       termination before it elects to remedy that default on its own terms.

Id. (emphasis in original) (quoting Hunt Constr. Grp. v. Nat’l Wrecking Corp., 587 F.3d

1119, 1121 (D.C. Cir. 2009)). Because the contractor failed to provide such timely notice,

the surety was not obligated to perform under the bond. Id. at 105 (citing Int’l Fid. Ins.

Co. v. Americaribe-Moriarty JV, 192 F. Supp. 3d 1326, 1334 (S.D. Fla. 2016), aff’d, 681

F. App’x 771 (11th Cir. 2017) (if an obligee hires a new subcontractor before the surety

has an opportunity to respond to termination, the surety’s obligations under the bond are

discharged)).

       The contractor argued that, if there was a failure to provide notice under any section,

Section 4 of the bond required the surety to demonstrate “actual prejudice” to avoid

liability. W. Sur. Co., 955 F.3d at 105. To the extent the court implied a timely notice

requirement under Section 3.2, the requirement to demonstrate actual prejudice to avoid

liability under the bond should equally apply to any such implied condition. Id.

       In reading the plain language of that provision, the D.C. Circuit observed that the

requirement to demonstrate actual prejudice applies to a failure to give notice only under

Section 3.1 (notice that the obligee is “considering declaring” a default). Id. There is no

similar requirement when the obligee fails to give timely notice of default and termination

under Section 3.2. Id. It held that, under the plain language of the bond, the surety is not

required to demonstrate actual prejudice to avoid liability under the bond if the obligee

fails to provide notice of default and termination under Section 3.2. Id. at 106 (citing

                                             15
United States ex rel. Agate Steel, Inc. v. Jaynes Corp., No. 2:13-CV-01907-APG-NJK,

2016 WL 8732302, at *7 (D. Nev. June 17, 2016) (“failure to comply with [S]ection 3.2

[of A312 bond] is a condition precedent to [the surety’s] obligations arising under the bond,

and the parties contractually agreed that [the surety] need not show prejudice from that

failure to relieve it of its obligations.”)).

       The D.C. Circuit proceeded to explain that even if the surety had to demonstrate

actual prejudice to avoid liability, it would not be liable under the bond due to the “inherent

prejudice” it suffered under the circumstances:

       By failing to provide notice under [S]ection 3.2, [the contractor] robbed [the
       surety] of its contractually agreed-upon opportunity to participate in the
       mitigation process entirely. Although not necessary to our opinion, it would
       seem that is inherently prejudicial. Thus, even if we required [the surety] to
       demonstrate actual prejudice, it would not be liable under the bond due to the
       inherent prejudice it suffered.

Id.

       Courts in other jurisdictions have employed the same reasoning and reached similar

conclusions. See, e.g., Seaboard Sur. Co. v. Town of Greenfield, 370 F.3d 215, 219–20

(1st Cir. 2004) (concluding that surety was discharged from liability under an A312 (1984)

bond when owner contracted with different contractor without first allowing surety

opportunity to fulfill its completion options under bond; even if surety must show injury,

loss, or prejudice, it met this hurdle, given its deprivation of mitigation opportunities);

Stonington Water St. Assoc., LLC v. Hodess Bldg. Co., 792 F. Supp. 2d 253, 267 (D. Conn.

2011) (obligee’s failure to notify surety of obligor’s default and unilateral decision to hire

successor contractors to complete defaulted work deprived surety of opportunity to

                                                16
mitigate damages and were material breaches of A312 performance bond); Town of

Plainfield v. Paden Eng’g Co., 943 N.E.2d 904, 916 (Ind. Ct. App. 2011) (lack of notice

regarding contractor’s termination was presumptively prejudicial to sureties).

       We are persuaded by the reasoning in Western Surety and similar decisions by courts

in other jurisdictions. We construe the Bond to be read as requiring Wildewood Operating

to timely notify First Indemnity of the default before a third party took over remedial work.

See W. Sur. Co., 955 F.3d at 104–05. To read the language of the Bond otherwise would

render meaningless the options set forth in Section 5 of the Bond and “gut rights”

specifically afforded to First Indemnity. Id. at 104 (quoting Hunt, 587 F.3d at 1121–22).

This reading comports with the fundamental principle that a contract must be construed in

its entirety, and effect must be given to each clause to avoid an interpretation that casts out

or disregards a meaningful part of the language. 6 See Cochran v. Norkunas, 398 Md. 1, 17

(2007).

       We hold that, because Wildewood Operating failed to provide timely notice under

Section 3.2, it did not satisfy a condition precedent in the Bond, and First Indemnity’s

liability under the Bond is discharged. See W. Sur. Co., 955 F.3d at 104–05. Our

conclusion is in accord with the general principle that “when a condition precedent is

       6
         At oral argument, Wildewood Operating argued that, if the Court reads a timely
notice requirement into Section 3.2, then the “actual prejudice” requirement in Section 4
must “carry over” and apply to Section 3.2. This point, however, was not raised in
Wildewood Operating’s brief, and we decline to address it. See Uninsured Employers’
Fund v. Danner, 388 Md. 649, 664 n.15 (2005) (the Court need not address arguments,
raised for the first time at oral argument, that were not briefed on appeal). In any event,
we conclude, infra, that even if the Bond required First Indemnity to demonstrate actual
prejudice, First Indemnity was prejudiced as a matter of law under the circumstances.
                                              17
unsatisfied, the corresponding contractual duty of the party whose performance was

conditioned on it does not arise.” Chesapeake Bank, 166 Md. App. at 708; Laurel Race

Course, Inc., 274 Md. at 154.

       Based on the plain language of Section 4, the “actual prejudice” requirement applies

to the failure to give notice under Section 3.1, not Section 3.2. See W. Sur. Co., 955 F.3d

at 105–06. Even if the Bond required First Indemnity to demonstrate actual prejudice to

avoid liability, we conclude that First Indemnity was prejudiced as a matter of law when it

was precluded from exercising its rights under Section 5. See id. at 106. Those rights are

significant. Had First Indemnity received timely notice under Section 3.2, it would have

had the opportunity to elect a remedial option under Section 5 and minimize its liability.

       Wildewood Operating claims that the out-of-state cases conflict with Maryland law

as set forth in General Builders Supply Co. v. MacArthur, 228 Md. 320 (1962). In General

Builders, the owner entered into an agreement with a builder under which the builder

proposed to construct a house for $29,431. Id. at 322. After making payment for materials,

the owner became concerned about the builder’s ability to meet its obligations and

demanded a performance bond to assure compliance with the construction contract. Id. at

322–23. The surety executed the bond with the builder and delivered it to the owner. Id.

at 323. “The obligation of the bond was to the effect that if the principal did not perform

its contract with the owner, then the surety would ‘remedy the default’ or ‘complete the

contract in accordance with its terms and conditions.’” Id. Thereafter, the builder was not

able to meet its obligations under the construction contract. Id. “The surety was notified

of the builder’s default, but it denied liability, and refused to complete the house.” Id. at

                                             18
323–24. When the surety also defaulted, the owner proceeded to complete the construction

of the house, spending more than the contract price. Id. at 324. The owner sued the surety

on the performance bond, and the court entered judgment against the surety in an amount

for the excess over the contract price. Id.

       On appeal, the surety argued, inter alia, that it was relieved of liability because the

owner breached the construction contract by expending more money than was permitted

under the contract. Id. at 326. The Supreme Court of Maryland rejected the contention

and affirmed the judgment, reasoning:

       The very purpose of the performance bond was to secure the owner against
       loss under the contract, and it imposed on the surety an obligation to pay such
       damages as are ascertained to result from the default of the contractor,
       without regard to the specific performance of the contract.

       The liability of a surety is coextensive with that of the principal, and it is
       clear that the liability of the surety is measured by the contract of the
       principal.

       While the construction contract and the appended plans and specifications
       were not included in the record extract, as they probably should have been,
       there is enough in the record extract and the appendix to show that the owner
       was to be furnished with a completed dwelling for the sum of money
       stipulated in the contract. Since there was not substantial compliance with
       the terms of the contract, the owner had a right to expend such sums as were
       necessary for completion in accordance with the plans and specifications and,
       in turn, hold the surety liable for the excess over the contract price.
       Furthermore, since the terms of the contract, including the plans and
       specifications, were incorporated in and made a part of the suretyship
       agreement, it is irrelevant whether the surety or the owner completed the
       construction as the result would be the same in either event.

Id. (cleaned up and emphasis added).

                                              19
       Relying on the highlighted passage, Wildewood Operating contends that the

essential facts in the instant case are no different than the facts that supported judgment

against the surety in General Builders, and therefore, we should reverse the grant of

summary judgment in First Indemnity’s favor. Wildewood            Operating’s    reliance   on

General Builders is misplaced because the facts and circumstances are distinguishable

from those in the instant case. Significantly, the bond in General Builders did not implicate

the same notice requirements as the Bond here. Nor was there any argument by the surety

that it should have been discharged of liability because the owner failed to comply with a

condition precedent.

                                      CONCLUSION

       We decline to extend First Indemnity’s liability beyond the terms of the Bond. See

Mayor & City Council of Balt., 282 Md. at 441. The parties entered into a contract wherein

Wildewood Operating agreed to satisfy certain conditions precedent, and First Indemnity

was entitled to elect among specified options upon the satisfaction of those conditions.

Because Wildewood Operating failed to timely notify First Indemnity of Clark Turner’s

default and termination under Section 3.2, First Indemnity’s liability under the Bond is

discharged. Section 4 of the Bond does not require First Indemnity to demonstrate actual

prejudice for failure to give notice under Section 3.2, but even if it did, First Indemnity was

prejudiced as a matter of law under the circumstances. While we recognize that the purpose

of the performance bond is to secure the owner against loss under the bonded contract and

impose on the surety an obligation to cure the default of the contractor, that purpose “is not

a blank check to the judicial power to rule out the pacts and agreements between the

                                              20
parties.” St. Paul Fire & Marine Ins. Co. v. VDE Corp., 603 F.3d 119, 123 (1st Cir. 2010)

(citations omitted). For the reasons stated, the circuit court did not err in granting summary

judgment in First Indemnity’s favor.

                                           JUDGMENT OF THE CIRCUIT COURT
                                           FOR ST. MARY’S COUNTY AFFIRMED.
                                           COSTS TO BE PAID BY THE
                                           APPELLANT.

                                             21
The correction notice(s) for this opinion(s) can be found here:

https://mdcourts.gov/sites/default/files/import/appellate/correctionnotices/cosa/0388s22cn.pdf