Bluеhaven 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”), allеging 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 court 2 granted summary judgment in favor of First American on all claims. We affirm.
1. BACKGROUND
First American is a California corporation authorized to do business in Missouri as a land title insuranсe 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 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 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 com
II. STANDARD OF REVIEW
We review a district court’s grant of summary judgment de novo.
Mayer v. Nextel West Corp.,
III. DISCUSSION 7
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
“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.,
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 commitmеnt 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 conсlusion 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 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 consеnt 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 somеhow 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 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.,
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.
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 clаim, 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.,
Appellants’ negligence claim is based on the allegation that First American owed them а 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 Agеncy 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 contract.”
Owens,
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 id. However, the exception does not apply here, as the facts of this case differ in several impоrtant 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 reliеd 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 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 Agreеment 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 esсrow 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 reviеw 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
IV. CONCLUSION
The district court’s grant of summary judgment in favor of First American on all claims is affirmed.
Notes
. The Honorable Stephen N. Limbaugh, Jr., United States District Judge for the Eastern District of Missouri.
. When Hаrtmann 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.
. There is evidence that Capital Title issuеd 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.
. 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.
. 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
. This action is based on diversity jurisdiction, and therefore, state law governs issues of substantive law.
Oriental Trading Co. v. Firetti,
. Appellants stipulated that they do not assert or rely on an apparent authority theory.
. 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 Ill 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.