                              UNPUBLISHED

                    UNITED STATES COURT OF APPEALS
                        FOR THE FOURTH CIRCUIT


                              No. 00-2028



RELIANCE INSURANCE COMPANY, INCORPORATED, a
Pennsylvania corporation,

                                               Plaintiff - Appellee,


          and

UTICA MUTUAL INSURANCE COMPANY,

                                              Third Party Defendant,


          versus

WILLIAM RAY MILLER, II; DONNA MANNINO,

                   Defendants & Third Party Plaintiffs - Appellants,


          and

J. L. HICKMAN & COMPANY, INCORPORATED, a/k/a
IFA Insurance Services, Incorporated, a Texas
corporation; JOHN L. HICKMAN,

                                                         Defendants.


Appeal from the United States District Court for the District of
Maryland, at Baltimore. Marvin J. Garbis, Senior District Judge.
(CA-97-3194-MJG)
                              No. 04-1843



WILLIAM RAY MILLER; DONNA MANNINO,

                                                Debtors - Appellants,


           versus

RELIANCE INSURANCE COMPANY,

                                                 Creditor - Appellee.


Appeal from the United States District Court for the District of
Maryland, at Baltimore. William D. Quarles, Jr., District Judge.
(CA-04-216-WDQ; CA-04-255-WDQ; BK-00-6-1758-JS; BK-00-6-3699-JS)


Argued:   February 1, 2005                  Decided:   August 18, 2005


Before MICHAEL and DUNCAN, Circuit Judges, and Robert E. PAYNE,
United States District Judge for the Eastern District of Virginia,
sitting by designation.


Affirmed by unpublished per curiam opinion.


ARGUED: James Russell Schraf, LOGAN RUSSACK, L.L.C., Annapolis,
Maryland, for Appellants. Philip Melton Andrews, KRAMON & GRAHAM,
Baltimore, Maryland, for Appellee. ON BRIEF: Victor I. Weiner,
LIPSHULTZ AND HONE, CHARTERED, Silver Spring, Maryland, for
Appellants.   Kathleen A. Birrane, KRAMON & GRAHAM, Baltimore,
Maryland, for Appellee.


Unpublished opinions are not binding precedent in this circuit.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




                                   2
PER CURIAM:

     William Ray Miller, II and Donna Mannino appeal from the award

of summary judgment against them on a claim of constructive fraud

brought by Reliance Insurance Company, Inc.1   For the reasons set

forth below, we affirm the judgment entered by the district court.

     Miller and Mannino also appeal from judgments entered against

them in related adversary proceedings in the bankruptcy court which

were affirmed by the district court.2       We also affirm those

judgments.



                                I.

     Miller and Mannino deny any culpable animus respecting the

facts that gave rise to this litigation, and they dispute the legal

conclusions reached by the district court in granting summary

judgment and in refusing the discharge in bankruptcy. However, the

record discloses that the material facts outlined below are not

genuinely in dispute.

     John L. Hickman & Company, Inc. (“Hickman, Inc.”) was a Texas

corporation with a branch office in Maryland. Hickman, Inc. traded

as IFA Insurances Services (“IFA”).   The Chief Executive Officer


     1
       That appeal is No. 00-2028. The appeal was stayed pending
resolution of related cases in the bankruptcy court.
     2
       That appeal is No. 04-1843.    Reliance originally filed
separate adversary actions against Miller and Mannino, but those
cases were consolidated by the bankruptcy court and the district
court.

                                3
and sole shareholder of Hickman, Inc. was John L. Hickman.                Miller

and Mannino were employed by Hickman, Inc. as insurance agents.

     Miller began working for Hickman, Inc. in September 1992 and

continued working there until March 31, 1997, serving as the

company’s Executive Vice-President and Chief Operating Officer in

the Maryland office.       Mannino began working for Hickman, Inc. in

early 1994 and continued working there until March 31, 1997.

Mannino was, at various times, Hickman, Inc.’s Assistant Vice-

President, office manager, and customer service representative. At

all relevant times, Miller and Mannino were licensed resident

insurance agents in Maryland, and thus were subject to Maryland’s

insurance laws and regulations. Hickman, Inc. ceased operations in

Maryland on March 31, 1997.

     It   was   the   business   of   Hickman,     Inc.    to   sell   insurance

coverage and then to place that coverage with one or more insurers.

As part of the conduct of its regular business operations, Hickman,

Inc. engaged in a financial scheme which Hickman devised and in

which Miller and Mannino knowingly participated.                The litigation

which   prompted   these   appeals    arose   as    a   consequence     of   that

financial scheme and its ultimate failure.

     Under the scheme, when Hickman, Inc. placed coverage with an

insurer, it requested, as a matter of course,             the insurer to agree

to an installment payment plan (preferably interest-free) by which

the insured would remit monthly premium payments through Hickman,


                                      4
Inc.    At the same time, the scheme called for Hickman, Inc. to

arrange for the insured to finance the premium through an unrelated

financing entity.      However, under the scheme, the insured was not

informed    of   the   availability   of   an   interest-free   installment

premium payment plan and the insurer was not informed that the

entire premium was being financed.

       Under the scheme, Hickman, Inc. arranged the premium financing

pursuant to which the insured borrowed the entire premium which

then was deposited with Hickman, Inc., which, in turn, remitted the

monthly premium payments to the insurer.            Although the borrowed

funds initially were deposited into Hickman, Inc.’s premium trust

account, it was the usual practice to remove funds from that

account and to deposit them into other Hickman, Inc. or IFA

accounts.   Then, those funds were used to pay the debts of Hickman,

Inc., salaries and bonuses to officers and employees of Hickman,

Inc., including Miller and Mannino, and monthly installments on

policy premiums other than the one for which the premium financing

had been obtained in the first instance.           In sum, not long after

the proceeds of premium policy financing were deposited into

Hickman, Inc.’s trust account, they were co-mingled with other

Hickman Inc. funds and used for purposes other than paying the

premiums for which the loan was made, all of which purposes were

beneficial to Hickman, Inc., its officers and employees.




                                      5
     Miller’s principal responsibility in the Maryland office was

to sell insurance and, in connection with placing the coverage that

he   sold,     Miller     often   applied    for    the   premium     financing.

Mannino’s responsibility included acting as a customer service

representative on Miller’s accounts.           Miller and Mannino routinely

were requested to wire funds from the premium trust accounts to

other Hickman, Inc. or IFA accounts.               Mannino often filled out

premium financing application sheets and sent them to the finance

company and, in return, received the quotes given by the insurers.

She often supplied this figure to Miller and, after the financing

arrangement     was    concluded,    Mannino    processed      the    agreement.

Mannino’s     responsibility      included   receiving       checks    from   the

insured, putting them into the trust account, and paying out

installments to the insured from the operating accounts.                      The

record established that this so-called “double-financing” policy

was a regular practice of Hickman, Inc. with which Miller and

Mannino were intimately familiar and in which they knowingly

participated.         This scheme was in effect at the time of the

insurance transaction which is the subject of this litigation.

     During the summer of 1996, Miller requested Reliance to quote

commercial     coverage     for    Gunther’s       Leasing   Transport,       Inc.

(“Gunther’s”).    Reliance offered to provide the requested coverage

for a quoted premium price of $1,050,000.                 In accord with the

ususal practice, Miller requested Reliance to provide installment


                                       6
payment terms and Reliance agreed to an interest-free premium

installment plan under which Gunther was to make a payment of

$210,000 at the beginning of the coverage to be followed eight

consecutive monthly payments of $105,000.           As envisioned by the

standard scheme, Miller passed the premium quote ($1,050,000) along

to Gunther’s without disclosing that Reliance also had agreed to an

interest-free installment plan and, instead, misrepresented to

Gunther’s that the entire premium was due at the inception of

coverage.    Thereafter, Gunther’s agreed to purchase the coverage

from Reliance, and, pursuant to standard practice, Miller and

Mannino arranged for the financing of the premium through INAC Corp

(“INAC”), a premium financing company.

     Although both Miller and Mannino were aware that the Gunther’s

premium would be financed by INAC, neither Miller nor Mannino

informed    Reliance   of   that   fact.   Miller   accepted   Reliance’s

quotation on behalf of Gunther’s with the installment plan in

place.   Reliance then issued the insurance coverage to Gunther’s,

and Gunther’s entered a commercial finance agreement with INAC, the

net proceeds of the premium loan being deposited in Hickman, Inc.’s

premium trust account, an account over which Miller and Mannino

both had actual control.

     However, neither Hickman, Miller, nor Mannino remitted the

proceeds of the financed premium to Reliance. Instead, Mannino, in

accord with the scheme, sent Reliance the premium down payment of


                                      7
$210,000.    The   remainder   of   the   financed   premium   was   then

transferred from the premium trust account to other Hickman, Inc.

trust accounts and was used to pay salaries and bonuses to Hickman,

Miller, and Mannino and to pay the debts and obligations of

Hickman, Inc. including the payment of premiums paid to other

insurance carriers.

     The record establishes that, by September 1996, the premiums

generated by the scheme were insufficient to replace premiums that

had been diverted from the premium trust accounts to Hickman Inc.

accounts. However, the large infusion provided by the financing of

the Gunther’s premium permitted Hickman, Miller, and Mannino to

cover premiums owed to other carriers and to otherwise finance

Hickman Inc.’s operations, including the payment of their own

salaries and commissions.

     On October 21, 1996, INAC sent to Reliance a form letter that

referred to a premium financing arrangement as to the Gunther’s

policy, advising that the premium had been paid to Hickman Inc.

That letter also queried Reliance as to whether the policy had been

written in installments and two other ensuing inquiries to the same

effect were submitted to Reliance, the last one on November 1,

1996.   In response to those letters, an employee of Reliance

communicated with Mannino about the INAC inquiries.             Mannino

claimed to recall little about the substance of the conversation,

but she acknowledged that she did not disclose the truth about the


                                    8
financing of the premium, claiming, instead, that she was unaware

if there was an installment plan, and that the insured had not

given Hickman, Inc. an option on how to pay the premium.

     Hickman,    Inc.   made   the   monthly    installment   payments   of

$105,000 to Reliance in November and December 1996 and in January

1997.     However, by February 1997, Hickman, Inc. was out of funds

and no further payments were made.         JA 268-69.   At the end of March

1997, the Maryland office of Hickman, Inc. was closed, leaving a

balance of $472,500 owing to Reliance on the Gunther’s policy.



                                     II.

        Thereafter, Reliance instituted this action against Hickman,

Inc., Hickman, Miller, and Mannino.          The Complaint contained six

counts.     Hickman, Inc. was a defendant in each count and was the

only defendant in two counts, but Hickman, Inc. never answered the

Complaint, and default judgment was entered against it in the

amount of $472,500 with interest and costs.3            Reliance moved for

summary judgment on Count III, a constructive fraud claim against

Hickman, Inc., Miller, and Mannino.            The district court, Judge

Garbis presiding, granted Reliance’s motion for summary judgment,

finding: (a) that all three defendants had a fiduciary duty to

Reliance under an implied agency relationship and under Maryland’s


     3
       Counts I and VI were eliminated from the case with the entry
of default judgment against Hickman, Inc., leaving Counts II, III,
IV, and V for resolution.

                                     9
insurance regulations; and (b) that the defendants had breached

their fiduciary duties by not disclosing to Reliance the “double-

financing” scheme, by co-mingling premium payments with the funds

of Hickman, Inc., and by remitting to Reliance the premium payments

received in trust for it.4    Thereupon, the district court entered

judgment in favor of Reliance in the amount of $472,500 plus pre-

judgment interest from June 1, 1997 plus post-judgment interest and

costs.     Miller and Mannino appealed from the award of summary

judgment on Count III.    While that appeal was pending, Miller and

Mannino filed for Chapter 7 bankruptcy protection, and thus the

appeal was stayed pending resolution of the bankruptcy proceedings.

       The bankruptcy court refused to discharge the debts created by

the judgment entered on Count III, and the district court, Judge

Quarles presiding, affirmed that decision.     The discharge ability

issue was then appealed to this Court where it was consolidated

with the appeal respecting the award of summary judgment on Count

III.




       4
       Hickman, Miller, and Mannino had moved for summary judgment
on all counts against them, Counts II through V.      For the same
reasons that resulted in an award of summary judgment to Reliance
on Count III, the district court denied the defendants’ motions for
summary judgment on Counts II, IV, and V. Neither side moved for
summary judgment on Count VI. Subsequently, Reliance chose not to
proceed on Counts II, IV, V, and VI, and those claims were
dismissed without prejudice to being reopened in the event that the
summary judgment in Reliance’s favor on Count III was reversed.

                                  10
                                   III.

     Before   proceeding    to   the    merits   of   the   appeals,   it   is

appropriate   to   note   that   the    scheme   involved   here,   Miller’s

involvement in it, and a determination that, by participating in

the scheme, Miller had violated his fiduciary duties to a similarly

situated insurer, was the subject of the decision of the Court of

Appeals of Maryland in Insurance Co. of North America v. Miller,

765 A.2d 587 (Md. 2001) (the “IFA Action”).                 The IFA Action

involved the operation of the scheme outlined above, but there the

scheme was applied to the placing of other insurance coverage for

Gunther’s.

     On facts virtually identical to those in this record, the

Court of Appeals held that:

     [Miller] was an agent of IFA for the purpose of
     collecting and forwarding premiums, which imposed upon
     him a fiduciary duty to IFA, which he breached by failing
     to forward to IFA he relevant premiums and/or by not
     notifying IFA, or timely sharing with IFA his knowledge,
     the premiums at issue were being improperly diverted.
     Additionally, [Miller] breached his fiduciary duty to IFA
     when he actively participated in obtaining premium
     financing for an insurance premium of an IFA insured, and
     used the funds to return to another premium financing
     company monies due it on a completely unrelated
     transaction, instead of causing the funds to be remitted
     directly to IFA for the premium due it. We also hold
     that [Miller’s] actions in the double financing scheme,
     at a minimum, could constitute negligence.

Insurance Co. of North America v. Miller, 765 A.2d at 588-89.5



     5
       In the IFA Action, Miller admitted that he was an agent for
IFA in collecting and remitting premiums for IFA. That difference
is not of significance because, as explained previously, the facts
in this record show that, under Maryland law, Miller was an agent
for collecting and remitting premiums for Reliance.

                                       11
     After that judgment, Miller filed for Chapter 7 bankruptcy

protection wherein he sought to have the judgment debt in the INA

Action discharged in bankruptcy.         The bankruptcy court held that

the debt was nondischargeable under 11 U.S.C. § 523(a)(2)(A),

(a)(4) and (a)(6).       The district court affirmed that judgment.

Miller v. CIGNA Insurance Co., 311 B.R. 57 (D. Md. 2004).            In an

unpublished opinion, we affirmed that decision, relying on the

reasoning   of   the   district   court,   which   denied   the   discharge

“[b]ecause Miller misappropriated money that he held in a fiduciary

capacity for Cigna [INA].” Miller v. CIGNA Insurance Co., 117 Fed.

Appx. 259 (4th Cir. 2004) (citing Miller v. CIGNA Insurance Co.,

311 B.R. 57 (D. Md. 2004)).



                                   IV.

     In awarding summary judgment on the constructive fraud count,

the district court held that Miller and Mannino owed to Reliance a

fiduciary duty which “derived from two sources, either of which

alone would be sufficient: (a) the implied agency relationship

between Defendants and Plaintiff and (b) the relevant Maryland

regulations governing insurance agents and brokers.”          It is those

determinations that are the focal points of the appeal of this

appeal.   We review de novo the award of summary judgment.




                                    12
               A. The Existence of Fiduciary Duties

     Addressing the fiduciary duty arising from an implied agency

relationship between Miller and Mannino and Reliance, the district

court first explained that, under Maryland law, a broker can serve

as an agent for both the insured (in procuring the insurance) and

for the insurer (for the purposes of the delivering the policy and

collecting the premiums).   Neither Miller nor Mannino contest this

basic principle.   Applying that settled principle to the facts of

record, the district court held that, notwithstanding the absence

of an express agency agreement, Miller and Mannino were Reliance’s

agents for the purpose of collecting premiums and remitting them to

Reliance.   Miller and Manning contend that, on this record, there

were factual issues that had to be submitted to a jury to ascertain

whether Miller and Mannino were the agents of Reliance.   We agree

with the district court that the undisputed facts demonstrate that,

under settled Maryland law, Miller and Mannino were the agents of

Reliance for the purpose of collecting premiums from Gunther and

remitting them to Reliance.    Accordingly, there was no need   to

submit that question to the jury.

     As to the fiduciary duty arising under Maryland’s insurance

regulations, the district court relied upon the Code of Maryland

Administrative Regulations (“COMAR”), Title 31, Subtitle 3.     In

particular, the district court concluded that, under relevant

Maryland regulations, Miller and Mannino, in their capacity as


                                 13
brokers, had fiduciary duties not to remove monies from premium

trust accounts without the express permission of the insured and

not to mingle premium monies with the funds of Hickman, Inc.

     In their statement of issues on appeal, Miller and Mannino did

not challenge that ruling.       However, in the substance of their

brief, they assert that the district court erred in holding that

those insurance regulations provided an independent basis for a

fiduciary relationship between Miller and Mannino and Reliance. In

making that argument, Miller and Mannino do not contend that the

district court erred in finding that the Maryland regulations

actually   created   fiduciary   obligations   the   breach   of   which

constitute constructive fraud.         Instead, they argue that the

regulations distinguish between agents and brokers, by making the

agent a fiduciary only of the insurer and by making the broker a

fiduciary of only the insured.6        The argument misses the point

because it ignores § 10-127 of the Insurance Code which, along with

the definitions set forth in § 10-101(i), makes the broker an agent

of the insurer for purposes of collecting premiums. Md. Code Ann.,




     6
       Mannino did not make this argument in the district court.
Instead, she simply ignored the regulation contending that she,
individually, could not be impressed with the fiduciary duties to
Reliance because she did not agree to act as Reliance’s agent or
form some contractual relationship with Reliance.      Thus, as to
Mannino we need not notice the regulatory argument here. Singleton
v. Wulff, 428 U.S. 106, 120 (1976); Muth v. United States, 1 F.3d
246, 250 (4th Cir. 1993). However, the argument must be considered
because Miller raised it below.

                                  14
[Ins.] § 10-127, § 10-101(i).        We find no error in the district

court’s resolution of that issue.7



                 B. The Issue of Reliance’s Reasonable
                Reliance on the Fiduciary Relationship

     The second argument presented by Miller and Mannino is that

there was a question of fact for the jury to resolve respecting

whether,   in   perspective   of    the   communications   that   Reliance

received from INAC, Reliance reasonably relied on the existence of

the fiduciary relationship.        Although this argument was presented

below in context of the summary judgment motion made by Miller and

Mannino on Reliance’s actual fraud count (Count V), it was raised

for the first time on appeal as to the constructive fraud claim.8

Hence, the argument need not be considered.




     7
       Miller and Mannino do not challenge the findings of the
district court that, if there is a fiduciary duty, the conduct at
issue here breached it.
     8
       Miller and Mannino acknowledge that no Maryland decision has
subscribed to the novel position that they urge us to take.
Instead, they cite decisions, from other jurisdictions, that
address reliance on a misrepresentation of fact as an element of a
constructive fraud claim.     Those decisions do not support the
contention, made here by Miller and Mannino, that the principal’s
reliance on the fiduciary’s proper discharge of fiduciary duties is
an element of a claim for constructive fraud by a principal against
the agent.

                                     15
                                     V.

      After the district court entered summary judgment on the

constructive fraud claim, Miller and Mannino each filed a Chapter

7   proceeding.       Reliance   filed    adversary    proceedings   in    the

bankruptcy court seeking to have declared non-dischargeable the

debts created by the judgment entered by the district court in

favor of Reliance on its constructive fraud claim.          The bankruptcy

court held that the debts created by the judgment order were non-

dischargeable, relying on the findings made by the district court

in granting summary judgment.            The district court affirmed the

bankruptcy court’s decision.         In so doing, the district court

likewise relied on the findings made in the decision granting

summary judgment on the constructive fraud claim and held that

Miller and Mannino were collaterally estopped thereby.

      We review the determination of collateral estoppel de novo.

It is somewhat difficult to discern the argument actually being

made by Miller and Mannino on appeal but, given a fair reading, it

appears to be merely that, if the district court’s award of summary

judgment   on   the   constructive   fraud     claim   is   reversed,     then

collateral estoppel cannot occur.          That argument is of no moment

here because, in Part IV, we affirm the judgment of the district

court granting summary judgment.           In any event, it quite clear

that, under settled circuit precedent, this is a case for the

application of collateral estoppel.           Sedlack v. Braswell Servs.


                                     16
Group, Inc., 134 F.3d 219, 224 (4th Cir. 1998); Ramsay v. INS, 14

F.3d 206, 210 (4th Cir. 1994).

      The bankruptcy court determined that the judgment debt was not

dischargeable under 11 U.S.C. §§ 523(a)(2)(A)(4) and (A)(6), and

the district court followed suit.            We review de novo decisions on

matters of law, such as this.

      The sections of the Bankruptcy Code on which the bankruptcy

court and the district court relied to conclude that the debt was

not dischargeable require proof of a fraudulent misrepresentation

that: (a) induced another to act, or to refrain from acting; and

(b) caused harm to the plaintiff because the plaintiff justifiably

relied on the misrepresentation.            In re: Biondo, 180 F.3d 126, 134

(4th Cir. 1999).    Both the bankruptcy court and the district court

found that those elements were present. Miller and Mannino contend

that the requisites of the sections of the bankruptcy code on which

the   bankruptcy   court   and   the   district     court   relied   were   not

satisfied.   We conclude that it is not necessary to decide that

issue because the judgment debt is non-dischargeable under 11

U.S.C. § 523(a)(4).

      Of course, we may affirm a judgment on an alternate ground to

those relied on by the district court so long as that basis is made

out by the record.    Skipper v. French, 130 F.3d 603, 610 (4th Cir.

1997).    19 James Wm. Moore, et al., Moore’s Federal Practice

§ 205.05 (3d ed. 2005).      Under § 523(a)(4), bankruptcy “does not


                                       17
discharge   an   individual   from   any   debt   .   .   .   for    fraud    or

defalcation while acting in a fiduciary capacity. . . .”                 This

record establishes that Miller and Mannino committed constructive

fraud and defalcations while acting in a fiduciary capacity.                 The

district court, in Miller v. CIGNA Insurance Co., 311 B.R. at 61-

62, based on virtually the same evidence that was presented here,

concluded that a virtually identical debt was not dischargeable

under § 523(a)(4). We, albeit, in an unpublished opinion, affirmed

on the basis of the district court’s opinion.         We believe that, on

this record, the same rationale applies here. Therefore, we affirm

the nondischargeablity determination on the basis of § 523(a)(4).

     For the foregoing reasons, the judgments of the district court

on appeal in No. 00-2028 and in No. 04-1843 are



                                                                    AFFIRMED.




                                     18
