                            UNPUBLISHED

                   UNITED STATES COURT OF APPEALS
                       FOR THE FOURTH CIRCUIT


                            No. 04-1065



ALLEN E. SMITH, Reverend, individually and for
the benefit of the trusts established for him
by Clearview Baptist Church and on behalf of
all others similarly situated,

                                             Plaintiff - Appellant,


DAVID L. ARMBRISTER; JACQUELINE M. ARMBRISTER;
LARRY W. ARMBRISTER; CAROLYN Q. ARMBRISTER;
SHERMAN H. BLANKENSHIP; FRANCIS LENTZ; HELEN
LENTZ; LESLIE S. HOLLOWELL; ELVIS H. HESTER,
JR.;    WESTMINSTER     PRESBYTERIAN    CHURCH
CORPORATION OF GREENSBORO, NORTH CAROLINA;
DRAPER VALLEY BAPTIST CHURCH; PHYL WIGAL,
Personal Representative of the Estate of Larry
Wigal,

                                          Intervenors - Appellants,


          versus

CONTINENTAL INSURANCE    COMPANY,   a   foreign
corporation,

                                              Defendant - Appellee,


          and

CNA   FINANCIAL    CORPORATION,   a   foreign
corporation, and its divisions, subsidiaries,
and affiliates; CONTINENTAL CORPORATION, a
foreign corporation; RETIREMENT ACCOUNTS,
INCORPORATED, a foreign corporation; FISERV,
INCORPORATED, a foreign corporation,

                                                        Defendants.
Appeal from the United States District Court for the Western
District of Virginia, at Roanoke. James C. Turk, Senior District
Judge. (CA-01-653)


Argued:   September 30, 2004          Decided:   December 10, 2004


Before MICHAEL and DUNCAN, Circuit Judges, and Roger W. TITUS,
United States District Judge for the District of Maryland, sitting
by designation.


Affirmed by unpublished per curiam opinion.


ARGUED: David McKenzie Clark, CLARK BLOSS & WALL, P.L.L.C.,
Greensboro, North Carolina, for Appellants.       Anne G. Kimball,
WILDMAN, HARROLD, ALLEN & DIXON, Chicago, Illinois, for Appellee.
ON BRIEF: John F. Bloss, James E. Tanner, III, CLARK BLOSS & WALL,
P.L.L.C., Greensboro, North Carolina; John T. Jessee, FLIPPEN,
DENSMORE, MORSE & JESSEE, Roanoke, Virginia, for Appellants. Vilia
M. Drazdys, WILDMAN, HARROLD, ALLEN & DIXON, Chicago, Illinois;
John P. Fishwick, Jr., LICHTENSTEIN AND FISHWICK, P.L.C., Roanoke,
Virginia, for Appellee.


Unpublished opinions are not binding precedent in this circuit.
See Local Rule 36(c).




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PER CURIAM:

        Reverend      Allen     E.        Smith       and     twelve   other   Plaintiffs

(hereinafter “Plaintiffs”) sued the CNA Financial Corporation and

several of its affiliates (hereinafter “CNA”) in the United States

District Court for the Western District of Virginia.                               The suit

arose out of defaults on promissory notes issued by two Florida

corporations, First Capital Funding, Inc. (“First Capital”) and

U.S. Capital Services, Inc. (“U.S. Capital”), that were sold to the

Plaintiffs       by   The     Charterhouse            Group      (“Charterhouse”).      The

Plaintiffs allege that CNA permitted Charterhouse to misrepresent

CNA’s    role    as   insurer        of    the    promissory        notes,   inducing   the

Plaintiffs to purchase the investments. The promissory notes were,

in reality, a “Ponzi scheme” and the Plaintiffs lost the entirety

of their initial investments.



                                                 I.

       First Capital and U.S. Capital purchased, at a discount, the

accounts receivable of companies in need of immediate capital,

subsequently collecting payments due to the debtor companies as

they    became     due.       Funds        necessary        to    purchase   the   accounts

receivable were generated by the issuance of promissory notes by

First Capital and U.S. Capital.                       CNA provided credit insurance

coverage with respect to the accounts receivable, but not as to the

notes issued by First Capital and U.S. Capital.


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        In March 1996, First Capital VP Robert Rabeck explained to a

CNA agent (Mr. Warner) that First Capital wanted to sell notes and

asked if CNA’s name could appear in the advertising brochure.

Warner told First Capital that it could not state that the safety

of the principal of the notes was assured by CNA, nor should any

promotional material make reference to CNA.                  J.A. 1570.      First

Capital       agreed    and       CNA      did   not    investigate     further.

Notwithstanding Warner’s statement, First Capital’s brochure did

make reference to CNA and the Plaintiffs allege that the reference

to   CNA    induced    them   to    purchase     the   notes.      Specifically,

Plaintiffs point to a First Capital brochure which read:

      To assure and maintain the highest level of safety of
      principal, Continental Insurance Company, part of the 65
      Billion Dollar CNA/Continental Insurance group, conducts
      its own independent due diligence on all receivables and
      all debtor companies. FIRST CAPITAL SERVICES, INC. WILL
      ONLY FINANCE RECEIVABLES THAT ARE UNDERWRITTEN AND
      INSURED BY THE CONTINENTAL INSURANCE COMPANY (Government
      backed receivables are exempt from this requirement).

J.A. 40.

      Charterhouse, a Virginia firm providing financial services

focused on the needs of clergy, solicited the Plaintiffs for First

Capital and U.S. Capital.           Charterhouse explained that the notes

required a minimum investment of $25,000 and promised a return of

9.5%.      Charterhouse agents also represented to investors that CNA

“backed” the investments and presented a no-lose situation (either

9.5% return or the money back).             This assertion by Charterhouse is

belied,     however,    by    a    close    reading    of   the   brochure   which

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represents only that CNA insures the accounts receivable, not the

payment of the promissory notes.

       In the Fall of 1997, the Florida Comptroller, Department of

Banking and Finance, determined that the notes were unregistered

securities and instructed First Capital to stop selling the notes.

On   December   22,   1997,    Mr.     Levy,    an   agent     of   First   Capital,

incorporated U.S. Capital and sold notes very similar to those that

had been sold by First Capital. “This corporate shell game enabled

First Capital to obtain funds from the ongoing sale of Notes while

pretending that ‘First Capital’ was not still selling unregistered

securities.”    Appellant’s Brief at 14; see also J.A. 1573.                       The

notes continued to be sold, albeit under the name U.S. Capital

rather than First Capital.           Charterhouse employees continued to

solicit investors, representing that CNA was “backing” the notes.

       Around August 1998, CNA began to be contacted by investors who

were   interested     to   know    whether      it     was   “backing”      the    U.S.

Capital/First    Capital      notes.      CNA    was    then    contacted     by   the

Securities and Exchange Commission regarding its insurance policies

issued to First Capital.          At this point, CNA concluded that First

Capital had not abandoned selling the notes and had been using

CNA’s name in its advertising materials.                 CNA then sent a formal

cease and desist letter to U.S. Capital.                J.A. 1574.     On February

1, 1999 CNA did not renew First Capital’s existing one-year credit




                                         5
insurance policy.         Appellant claims that this sanction by CNA was

“too little too late”.         Appellant’s Brief at 18.

       In March 1999, the promissory note program began to collapse.

Commission payments to Charterhouse agents began to slow and

investors      stopped        receiving       timely     interest      payments.

Charterhouse, however, continued selling notes as late as May 1999.

In August 1999, U.S. Capital began to notify its sales agents that

it was under investigation and the future sale of notes was

suspended. After the notes program collapsed, the Plaintiffs filed

this suit.

       Plaintiffs’ Amended Complaint alleged seven counts against

CNA:    (1)fraud,     (2)   breach   of    fiduciary    duty,   (3)   breach   of

contract, (4) negligence, (5) unjust enrichment, (6) equitable

estoppel, and (7) aiding and abetting the sale of unregistered

securities.     CNA moved for Summary Judgment under Rule 56 of the

Federal Rules of Civil Procedure.             After recognizing that none of

the Plaintiffs had any contact with CNA, and concluding that the

CNA    had   made   no    affirmative     misrepresentations     regarding     the

promissory     note      program,   the   District     Court   for   the   Western

District of Virginia, The Honorable James C. Turk presiding,

granted CNA’s motion.




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                                II.



     The Plaintiffs appeal the decision of the district court

granting summary judgment for CNA on all counts of the Amended

Complaint.   After considering the briefs, the joint appendix, and

the arguments of counsel, we affirm on the reasoning of the

district court.   See Reverend Allen E. Smith, et. al. v. CNA

Financial Corporation, No. 7:01-cv-653 (W.D. Va. Nov. 28, 2003).

                                                         AFFIRMED



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