United States Court of Appeals
                          FOR THE EIGHTH CIRCUIT
                                  ___________

                                  No. 09-2383
                                  ___________

Bluehaven Funding, LLC, a Missouri       *
Limited Liability Company; Kanich        *
Development, LLC, a Missouri Limited     *
Liability Company,                       *
                                         *
             Plaintiffs - Appellants,    * Appeal from the United States
                                         * District Court for the Eastern
       v.                                * District of Missouri.
                                         *
First American Title Insurance           *
Company, a California Corporation        *
Authorized to do Business in the State *
of Missouri,                             *
                                         *
             Defendant - Appellee,       *
                                         *
Capital Title Company, Inc.,             *
                                         *
             Defendant.                  *
                                    ___________

                            Submitted: January 12, 2010
                               Filed: February 18, 2010
                                ___________

Before MURPHY and BYE, Circuit Judges, and STROM,1 District Judge.
                            ___________



      1
      The Honorable Lyle E. Strom, United States District Judge for the District of
Nebraska, sitting by designation.
STROM, District Judge.

       Bluehaven Funding, LLC and Kanich Development, LLC (collectively,
“appellants”) lost approximately $2.4 million in real estate loan proceeds as a result
of doing business with Robert Hartmann d/b/a DHP Investments LLC (“Hartmann”)
and Capital Title Company (“Capital Title”). In an effort to recover the losses,
appellants filed this lawsuit against First American Title Insurance Company (“First
American”), alleging First American was vicariously liable for Capital Title’s actions
due to an agency relationship that existed between the parties, and First American was
directly negligent for failing to monitor Capital Title’s business. The district court2
granted summary judgment in favor of First American on all claims. We affirm.

I. BACKGROUND
       First American is a California corporation authorized to do business in Missouri
as a land title insurance company. On or about July 9, 1999, First American entered
into a Policy Issuing Agency Contract (the “Agency Agreement”) with Capital Title
that named First American as “principal” and Capital Title as “agent.” In relevant
part, the Agency Agreement stated the following with regard to Capital Title’s
appointment as First American’s agent, and the scope of Capital Title’s authority
pursuant to the appointment:

      APPOINTMENT

      1.    Principal hereby appoints Agent to act for, and in the name of,
      Principal in transacting title insurance business, but only for the
      purposes and in the manner specifically set forth in this contract and
      for no other purpose and in no other manner whatsoever. The
      authority hereby granted is subject to all of the limitations on the


      2
       The Honorable Stephen N. Limbaugh, Jr., United States District Judge for the
Eastern District of Missouri.

                                         -2-
      scope of the Agency contained in this contract, the limitations and
      regulations imposed by the insurance laws of the State of Missouri and
      rules promulgated pursuant thereto.

      AUTHORITY

      2.    Agent is authorized to issue, in the name of Principal, title
      insurance commitments and policies (including endorsements hereto);
      provided, that:

      a. Each of them relates to land located in:

      COUNTIES OF: ST. LOUIS CITY AND COUNTY. . .

       From 2002 through 2004, appellants loaned approximately $2.4 million to
Hartmann for the purpose of purchasing properties to be rehabbed and sold. The
funds were held in an escrow account at Capital Title, and all of the loan transactions
were closed at Capital Title.3 Appellants understood that the loans would be secured
by first deeds of trust on the properties Hartmann purchased. With one exception,
there is no evidence that Capital Title issued a First American title insurance
commitment or policy to appellants as the insured to insure any of the loans,
properties, or transaction at issue.4 Ultimately, Hartmann diverted funds in the escrow
account to his own use, and when appellants sought to foreclose on properties for


      3
       When Hartmann sold a property that was purchased with the loan proceeds,
appellants instructed Capital Title to pay appellants the interest owed on the loan and
hold the principal in the escrow account to be “rolled over” into a new loan for
Hartmann to purchase another property.
      4
        There is evidence that Capital Title issued a Land Title Insurance Company
commitment for lender’s title insurance with Bluehaven as the insured for certain land
on Delmar Boulevard; Land Title Insurance Company is a wholly-owned subsidiary
of First American. There is also evidence that Bruce Hatrich, a prior co-owner of
appellants, obtained a commitment for title insurance on additional properties, but Mr.
Hatrich was not named as a party in this action.

                                         -3-
which they supposedly held deeds of trust, they learned that for many of the properties
their deeds of trust were not valid or lacked priority. Appellants claim Hartmann was
able to misappropriate escrow funds, and they received effectively worthless deeds of
trust because Capital Title mishandled escrow accounts and real estate closings.5

       In November 2004, First American learned that Capital Title had bounced
checks, and First American initiated an audit of Capital Title’s accounts. As of
January 14, 2005, First American’s findings revealed that the aggregate amount of
outstanding checks drawn on Capital Title’s escrow account exceeded the balance on
deposit in the escrow account by approximately $6.5 million. First American
terminated its agency relationship with Capital Title and filed a receivership lawsuit.
Capital Title ceased doing business in Missouri when all of its assets were seized and
liquidated by a trustee for the benefit of creditors in the receivership proceeding.

       In August 2006, appellants filed this action against First American.6 The
complaint contains 22 counts. The first 21 counts seek to hold First American
vicariously liable for various claims against Capital Title for breach of contract,
breach of fiduciary duty, and negligence based on allegations that Capital Title failed
to (1) properly and timely record deeds of trust, (2) ensure full pay-offs of appellants’
deeds of trust, (3) validate deeds of release, (4) verify satisfaction of pre-existing
deeds of trust, and (5) properly maintain and disburse escrow funds. Count 22 asserts
a claim for direct negligence against First American for failing to monitor and/or audit


      5
         In September 2005, Peter Shaw, who was president of Capital Title, pled
guilty to mail fraud and transportation of stolen money. In April 2009, Hartmann pled
guilty to two counts of mail fraud.
      6
        This action was originally filed in the Circuit Court for the City of St. Louis,
Missouri against First American and Capital Title. First American removed the action
to federal court based on diversity jurisdiction and the fraudulent joinder of Capital
Title. Thereafter, the district court dismissed Capital Title from the lawsuit without
prejudice for lack of service of process.

                                          -4-
Capital Title’s business. The district court granted summary judgment in favor of
First American on all claims, finding in relevant part that (1) the vicarious liability
claims failed because Capital Title did not have authority to act as First American’s
agent in performing the acts alleged in the complaint with respect to the transactions
at issue, and (2) the direct negligence claim failed because First American did not owe
appellants any duty to audit or monitor Capital Title’s business.

II. STANDARD OF REVIEW
      We review a district court’s grant of summary judgment de novo. Mayer v.
Nextel West Corp., 

, 806 (8th Cir. 2003). Summary judgment is
appropriate if the evidence, viewed in the light most favorable to the nonmoving party,
shows there are no genuine issues of material fact, and the moving party is entitled to
judgment as a matter of law. 

‘affirm the district court on any grounds
supported by the record.’” Duffy v. Wolle, 

, 1035 n.5 (8th Cir. 1997)
(quoting Yowell v. Combs, 

, 544 n.4 (8th Cir. 1996)).

III. DISCUSSION7
A. Vicarious Liability Claims (Counts I-XXI of the complaint)
      Appellants argue the district court erred when it found Capital Title did not
have authority to engage in the activities alleged in the complaint. Specifically,
appellants contend there is a genuine dispute as to whether Capital Title had express
or implied authority to perform escrow and closing services.8




      7
        This action is based on diversity jurisdiction, and therefore, state law governs
issues of substantive law. Oriental Trading Co. v. Firetti, 

, 944 (8th Cir.
2001). The parties do not dispute that Missouri law applies.
      8
          Appellants stipulated that they do not assert or rely on an apparent authority
theory.

                                           -5-
        “A principal is responsible for its agents’ acts and agreements that are within
the agent’s authority, whether the authority is actual or apparent.” Motorsport Mktg.,
Inc. v. Wiedmaier, Inc., 

, 498 (Mo. Ct. App. 2006) (quoting Sherman,
Taff & Bangert, P.C. v. Clark Equip. Co., 

, 127 (Mo. Ct. App. 2004)).
“Actual authority may be express or implied.” Hardcore Concrete, LLC v. Fortner
Ins. Servs., Inc., 

, 355 (Mo. Ct. App. 2007) (quoting Nichols v.
Prudential Ins. Co. of Am., 

, 661 (Mo. Ct. App. 1993)). “Express
authority is created when the principal explicitly tells the agent what to do[,] and
[i]mplied authority consists of those powers incidental and necessary to carry out the
express authority.” 

851 S.W.2d at 661) (internal quotation
marks omitted). Whether a principal-agent relationship exists is a question of fact.
Ritter v. BJC Barnes Jewish Christian Health Sys., 

, 384 (Mo. Ct.
App. 1999). The party asserting an agency relationship has the burden of proving the
existence of the relationship and the scope of the agent’s authority. Karr-Bick
Kitchens & Bath, Inc. v. Gemini Coatings, Inc., 

, 879 (Mo. Ct. App.
1996).

       Appellants’ vicarious liability claims rely on the premise that Capital Title had
authority to provide escrow and closing services as First American’s agent. The
district court appeared to find that Capital Title had authority to provide escrow and
closing services for “insured transactions” – transactions in which a title insurance
commitment or policy was issued, but Capital Title did not have authority to provide
escrow and closing services for “uninsured transactions.” Because the district court
concluded that all of the transactions at issue were uninsured transactions, it found that
Capital Title did not have authority to engage in the activities identified in the
complaint. We agree with the district court’s ultimate conclusion that Capital Title
lacked such authority.

      The Agency Agreement clearly and unambiguously defines the nature and
scope of First American and Capital Title’s agency relationship. Under the Agency

                                           -6-
Agreement, Capital Title’s authority to act as First American’s agent is limited to
those purposes specifically set forth in the Agency Agreement, and “for no other
purpose and in no other manner whatsoever.” The Agency Agreement specifically
grants Capital Title authority to issue title insurance commitments and policies for
specified land; the Agency Agreement does not specifically grant Capital Title
authority to provide escrow and closing services. There is no evidence that First
American manifested its express consent to grant Capital Title authority in addition
to the authority granted in the Agency Agreement. Accordingly, there is no genuine
dispute that the scope of Capital Title’s express authority was limited to issuing title
insurance commitments and policies and did not include the authority to provide
escrow and closing services.

      Appellants’ argument that section 9 of the Agency Agreement somehow
expands the scope of Capital Title’s express authority is without merit. Section 9
provides in part:

      9.    Agent shall allow Principal to periodically inspect and audit
      Agent’s escrow accounts and escrow files in those instances wherein
      Principal’s commitments and policies are issued pursuant to said
      escrows. The frequency and extent of such inspections and audits shall
      be determined by Principal. . . .

Appellants contend that because the Agency Agreement gives First American the right
to review Capital Title’s escrow accounts and files in certain circumstances, First
American must have expressly granted Capital Title the authority to act as its escrow
agent. This logic contradicts the clear and unambiguous contract language and is not
supported by the record.

      Further, the record does not support a finding that Capital Title had implied
authority to provide escrow and closing services. Appellants have not produced
evidence from which a reasonable jury could conclude that providing escrow and

                                          -7-
closing services was “incidental and necessary” to Capital Title’s express authority
to sell title insurance.

       Appellants rely on Coldwell Banker Relocation Services, Inc. v. TRW Title
Insurance Co., 

, 

(8th Cir. Jan. 8, 1996) (per curiam)
(unpublished), wherein the Eighth Circuit affirmed, in an unpublished, non-
precedential opinion, a district court’s determination that the title insurer was
responsible for its agent’s escrow activities. Coldwell is easily distinguishable from
this case. In Coldwell, there was “ample evidence” that the title insurer knew the
agent regularly performed escrow services at closings of transactions on which he had
written a title insurance policy, and the title insurer had issued a closing protection
letter. 

Here, the record does not support a finding that First American
knew Capital Title performed escrow services on behalf of First American, and there
is no evidence that First American issued a closing protection letter for appellants in
connection with any of the transactions at issue.

        There is no genuine dispute that Capital Title lacked actual authority to provide
escrow and closing services as First American’s agent. The conduct alleged in the
complaint falls outside the scope of Capital Title’s authority, and the vicarious
liability claims necessarily fail as a matter of law.9 The district court’s grant of
summary judgment in favor of First American on appellants’ vicarious liability is
affirmed.




      9
        The fact that Bluehaven obtained a title insurance commitment to insure funds
used to purchase one of the properties listed in Counts I, II, and III is irrelevant to the
validity of those claims because Counts I, II, and III seek to hold First American
vicariously liable for Capital Title’s failure to record deeds of trust – conduct that is
outside the scope of Capital Title’s actual authority.

                                           -8-
B. Direct Negligence Claim (Count XXII of the complaint)
      Appellants contend the district court committed a procedural error when it
granted First American summary judgment on the direct negligence claim because
First American did not move for judgment on the claim in the first instance.
Appellants further argue that even if we review the merits of the claim, the district
court erred when it found First American did not owe a duty to appellants. We
address the second argument first because we find its resolution impacts the first
argument.

       In order to establish a negligence claim, a plaintiff must prove, inter alia, that
the defendant had a duty to protect the plaintiff from injury. Owens v. Unified
Investigations & Scis., Inc., 

, 92 (Mo. Ct. App. 2005). “A duty to
exercise care can be imposed by a controlling statute or ordinance, assumed by
contract, or imposed by common law under the circumstances of a given case.”
Bowan v. Express Med. Transporters, Inc., 

, 457 (Mo. Ct. App. 2004).
In determining whether a duty exists in a particular case, Missouri courts consider
several policy factors, including the foreseeability of the harm. 

duty
exists is a question of law. 

claim is based on the allegation that First American
owed them a duty to monitor Capital Title’s business, and specifically, Capital Title’s
escrow activities. Appellants point to the Agency Agreement, First American’s
performance of the Agency Agreement, and common law as possible sources of this
duty. The district court properly found that, as a matter of law, First American did not
owe appellants the type of duty alleged.

       The Agency Agreement does not impose any duty on First American in favor
of appellants. Appellants were not parties to the Agency Agreement. “Generally, a
defendant who has contracted with another owes no duty to a plaintiff who is not a
party to that agreement, nor can a non-party sue for negligent performance of the

                                          -9-
contract.” 

. This general rule of privity serves two purposes:
(1) it protects the contractual parties from being exposed to unlimited liability, and (2)
it prevents burdening the contractual parties with obligations they have not voluntarily
assumed. 

have made exceptions to the general rule when
application of the rule “is not necessary to protect the contractual parties, or when it
would produce results contrary to justice and public policy[.]” Kaplan v. U.S. Bank,
N.A., 

, 70 (Mo. Ct. App. 2003).

        In this case, appellants rely on a well-established exception to the privity rule
for situations where negligent performance of a contract involves harm to third parties.
See 

exception does not apply here, as the facts of this case differ in
several important respects from those cases in which Missouri courts have utilized the
exception. First, the Agency Agreement does not obligate First American to review
Capital Title’s escrow accounts and files; rather, it simply gives First American the
right to do so “periodically” and at times to “be determined by” First American.
Second, nothing in the record supports a finding that appellants relied on the results
of any potential reviews First American might undertake, or that First American
understood that the reviews it might choose to perform would be for the benefit of
third parties. Indeed, the Agency Agreement clearly and explicitly establishes the
contrary, as it provides:

      The right of the Principal to periodically inspect and audit Agent’s escrow
      accounts and escrow files shall not be construed by the Agent or any
      party dealing with Agent as an undertaking on the part of Principal to
      assume any responsibility or liability for the acts of or any errors or
      omissions of the Agent in the performance of Agent’s duties as escrowee
      under any escrow agreement.

Finally, if we were to impose a duty on First American in this case, it would subject
First American to excessive liability, as any purported duty to review Capital Title’s



                                          -10-
files cannot logically be circumscribed to a limited group. Based on these facts, the
exception identified by appellants does not apply.

       Our conclusion is not impacted by the fact that First American exercised its
right under the Agency Agreement to review Capital Title’s files. It is evident from
the Agency Agreement and the remaining record that First American’s right to review
Capital Title’s escrow files and accounts was for First American’s own benefit and
protection, and not for the benefit of any third party. Neither the Agency Agreement
nor First American’s performance of the Agency Agreement imposed any duty on
First American in favor of appellants to review Capital Title’s escrow files and
accounts.

      Similarly, we do not find that common law creates any such duty. Importantly,
the Agency Agreement clearly disclaimed any duty to third parties, and as discussed
above, Capital Title was acting outside the scope of its authority when it provided
escrow and closing services to appellants. Since First American did not owe
appellants a duty to review Capital Title’s escrow and closing activities, appellants
cannot establish an essential element of their negligence claim.

       Aside from the merits, appellants also argue that the district court committed
a procedural error when it granted judgment in favor of First American on the direct
negligence claim. Appellants contend that because they were not afforded the
opportunity to respond to First American’s reply brief, we must remand this issue for
further consideration by the district court. We disagree. The issue of whether a legal
duty exists is a question of law, the issue has been fully briefed and argued by the
parties, appellants have not identified any additional facts they would present to the
district court that could alter the outcome, and the district court properly found that
no duty exists. Any remand would be futile and a waste of judicial resources.
Accordingly, we affirm the district court’s grant of summary judgment in favor of
First American on the direct negligence claim.

                                         -11-
IV. CONCLUSION
        The district court’s grant of summary judgment in favor of First American on
all claims is affirmed.
                         ______________________________




                                       -12-